Japan’s Abe pledges broad policy support to weather Brexit shock

Tokyo, June 29: Japanese Prime Minister Shinzo Abe pledged on Wednesday to use all available policy tools to keep the wheels of the economy turning as financial markets were gripped by uncertainty in the wake of Britain’s shock vote to exit the European Union.

The yen’s spike following the referendum has kept Japanese policymakers on edge as a stronger currency threatens to put more pressure on the export-reliant economy, already reeling from weak demand at home and abroad.

Retail sales fell more than expected in May, data showed earlier in the day, keeping policy makers under pressure to roll out more stimulus.

“Consumer spending has been stagnant and the trend is likely to continue for a while due to sluggish growth in wages,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

In a meeting to discuss post-Brexit market developments, Abe urged Bank of Japan (BOJ) governor Haruhiko Kuroda to ensure the central bank provides ample funds to the market to prevent any credit squeeze.

“A sense of uncertainty and worry about risks remain in the markets,” Abe told the meeting, the second between the government and the BOJ since the June 23 referendum.

The premier also called on finance minister Taro Aso to keep a close watch on currency moves and respond flexibly to market developments in coordination with Group of Seven economies.

Abe is expected to hold similar meetings regularly as Tokyo looks to put safeguards in place against potential instability in financial markets after Britain’s messy EU divorce.

Japan's Prime Minister Shinzo Abe