TOKYO: Prime Minister Shinzo Abe has been trying since late 2012 to revitalise Japan’s economy through his signature “Abenomics” policies, with aggressive monetary easing by the Bank of Japan (BoJ) at its foundation.
The central bank also kept intact its assessment that while exports and output were feeling the pain from weak emerging market demand, Japan’s economy has continued to recover moderately.
The BOJ kept its pledge unchanged to increase the monetary base at an annual pace of 80 trillion yen ($648 billion), a policy that’s weakened the yen and help inflate the profits of Japan’s large exporters. BoJ governor Haruhiko Kuroda defended the policy stance at a news conference saying that the economy was better than the GDP figures suggested.
“Risks to the outlook include developments in the emerging and commodity-exporting economies, the prospects regarding the debt problem and the momentum of economic activity and prices in Europe, and the pace of recovery in the USA economy”, the BoJ said, in the statement. “If it’s just oil prices remaining weak, the BOJ can afford to wait”. Japanese exports fell for the first time in more than a year in October, exacerbating concerns for an economy already in recession and struggling to boost inflation.
A slowdown in China, a big market for Japanese manufacturers, is adding to the drag on Japan’s economy. In the previous meeting on October 30, the bank pushed back the target date of achieving the 2 percent inflation goal to the second half of fiscal 2016 ending March 2017, from the first half of fiscal 2016 expected earlier.
With core CPI now slipping due largely to slumping oil prices, the central bank began internally calculating a new index that conveniently shows inflation exceeding 1 percent in the past few months.
“Exports show signs of bottoming out, but given declining export volume, they are unlikely to become a driver of growth in the current quarter as effects of China’s slowdown and falling commodity prices are spreading to other countries”.
Kuroda is urging companies to do more to tackle deflation, a tacit admission that his massive money-printing exercise has failed so far and that policymakers are losing faith in the value of delivering yet more of the same.
