BoJ lifts view of econ­omy; slid­ing yen boosts ex­ports

Kuwait Times - - BUSINESS -

The Bank of Ja­pan yes­ter­day lifted its view of the econ­omy for the first time in over a year, as the slid­ing yen boosts ex­ports, of­fer­ing some hope for Tokyo’s stut­ter­ing growth pro­gram. Pol­i­cy­mak­ers held fire on fur­ther stim­u­lus and said they would main­tain a plan to keep the yield on gov­ern­ment 10-year bonds around zero, part of a broader bid to stim­u­late growth in the world’s num­ber three econ­omy. The bank’s fi­nal meet­ing of 2016 came on the heels of strongerthan-ex­pected Novem­ber ex­port data and the first rise for more than a year in its closely watched Tankan sur­vey of busi­ness con­fi­dence.

“The drop in the yen has given the bank some flex­i­bil­ity,” said Toshi­hiko Sakai, a se­nior dealer at Mit­subishi UFJ Trust and Bank­ing.

“It’s taken pres­sure off the BoJ to ease more.” Bank gov­er­nor Haruhiko Kuroda said things were look­ing brighter as ex­ports and fac­tory out­put gather steam-the bank said they were “slug­gish” in a Novem­ber state­ment. That was its first up­grade to its view on the econ­omy since May 2015. The neg­a­tive im­pact of a slow­down in emerg­ing economies and Bri­tain’s vote to exit the Euro­pean Union were fad­ing, Kuroda said.

“There were head­winds in the first half of the year, but they’ve now dis­ap­peared,” he added.

Ja­pan has been on an un­sure re­cov­ery path and the cen­tral bank re­mains way be­hind reach­ing a two per­cent in­fla­tion tar­get that is a cor­ner­stone of gov­ern­ment ef­forts to re­vive the econ­omy. There are also ques­tions about whether the BoJ can keep buy­ing gov­ern­ment bonds at the cur­rent pace with­out shock­ing debt mar­kets.

‘Strong eas­ing’

Kuroda yes­ter­day brushed aside talk about ta­per­ing the BoJ’s mas­sive 80 tril­lion yen an­nual as­set-pur­chase scheme and sug­gested there was no limit to what mea­sures the BoJ can take.

“We have to press on with strong mone­tary eas­ing to reach the in­fla­tion tar­get as early as pos­si­ble,” he said. “I do not sub­scribe to the view that poli­cies face lim­its, like walls stand­ing in the way.”

The yen has tum­bled against the green­back since Don­ald Trump’s shock US pres­i­den­tial elec­tion win in Novem­ber fanned spec­u­la­tion that his plans for big gov­ern­ment spend­ing and tax cuts will force the Fed­eral Re­serve to hike bor­row­ing costs.

The Fed’s in­di­ca­tion last week that it could lift them three times next year sent the dol­lar surg­ing against the Ja­panese unit. That is good news for Ja­pan’s ex­porters as a weak yen boosts their com­pet­i­tive­ness and prof­itabil­ity.

Yes­ter­day, the dol­lar bought 118.06 yen from 117.07 yen ear­lier in the morn­ing. Kuroda said the yen’s level against the dol­lar was “not sur­pris­ing”, not­ing it brought the rate back to where it was ear­lier this year, be­fore Brexit.

In­vestors tend to buy Ja­pan’s cur­rency to shield them­selves in times of tur­moil. The cen­tral bank’s up­beat tone comes as Prime Min­is­ter Shinzo Abe’s big-spend­ing, easy-money plan to kick­start growth fal­ters.

Tokyo this month down­graded its Ju­lySeptem­ber growth es­ti­mate to 0.3 per­cent, from an ini­tial 0.5 per­cent reading. The cut un­der­lined the chal­lenges in re­viv­ing an econ­omy plagued by a de­fla­tion­ary price spi­ral that hurt ac­tiv­ity for years. For more than three years, BoJ pol­i­cy­mak­ers have em­barked on a bond-buy­ing stim­u­lus pro­gram to try to keep in­ter­est rates ul­tra-low and in­crease bor­row­ing and spend­ing.

Last month, the cen­tral bank said it ex­pects to hit two per­cent in­fla­tion by March 2019 — four years later than its orig­i­nal tar­get and the lat­est in a string of de­lays. The BoJ hoped con­sumers would spend more if prices were ris­ing, per­suad­ing firms to ex­pand op­er­a­tions and get­ting the econ­omy hum­ming.

But wage growth has fallen be­low ex­pec­ta­tions, mean­ing work­ers have less money to spend. Abe’s prom­ises to cut through red tapethe key third plank of Abe­nomics-have also been slow in com­ing. — AFP


TOKYO: Bank of Ja­pan Gov­er­nor Haruhiko Kuroda at­tends a meet­ing at the cen­tral bank head­quar­ters in Tokyo yes­ter­day.

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