BoJ lifts growth forecasts on global outlook
The projected growth rates are somewhat higher, mainly reflecting improvement in overseas economies and the yen’s depreciation.
TOKYO: Japan’s central bank hiked its economic growth forecasts yesterday, citing an improved global outlook and a weaker yen but the country’s f inance chief warned of ‘ uncertainty’ caused by the arrival of Donald Trump in the White House.
After its first meeting of the year the Bank of Japan also held off any fresh monetaryeasing measures, though earlier spending data highlighted the challenge facing officials trying to reignite the world’s numberthree economy.
The BoJ tipped expansion to hit 1.4 per cent in the current fiscal year to March, compared with its previous one per cent estimate, and 1.5 per cent growth in the following 12 months, from its earlier 1.3 per cent forecast.
In the year to March 2019 it saw 1.1 per cent growth, up from an initially flagged 0.9 per cent.
“The projected growth rates are somewhat higher, mainly ref lect ing improvement in overseas economies and the yen’s depreciation,” the bank said in its quarterly outlook.
The yen has lost about 10 per cent of its value against the dollar since the bank’s last forecast in November as traders bet Trump’s planned infrastructure spending, tax- cutting measures will fire US inflation and force the Federal Reserve to ramp up interest rates.
A weaker yen is positive for Japanese exports as it makes them more competitive abroad.
However, Trump’s arrival in the Oval Office has also fuelled confusion in world capitals, with fears he will also follow through on promises to tear up free-trade agreements, throw up tariffs and spark a global trade war.
On Tuesday Japanese Finance Minister Taro Aso told parliament: “The economy is a living thing and Trump uncertainty has emerged and is globally recognised.”
However, he stressed that the yen’s weakness would continue well into this year, at least as he sought to reassure over the outlook for the domestic economy.
While the BoJ did not explicitly mention Trump in its report, the future in a world with the realestate tycoon-turned-president is clearly on the minds of its policymakers.
“The BoJ is paying the most attention to what comes out of Trump, though it doesn’t say this directly,” Maiko Noguchi, an economist at Daiwa Securities, told Bloomberg News.
As expected, policymakers also kept monetary policy unchanged and their inflation projections largely unchanged as they struggle to bring an end to almost two decades of on- off deflation.
Earl ier Tuesday figures showed household spending fell in December for the 10th consecutive month, declining 0.3 per cent, although that was better than expectations of 0.9 per cent.
Last week, Japan logged its first annual consumer price decline in four years.
The data came as worrying reading for Prime Minister Shinzo Abe, who came to office in December 2012 with a blockbuster growth plan of massive monetary easing, government spending and red-tape slashing.
While the measures had a positive initial impact, growth remains fragile and inflation is still well below the BoJ’s two per cent target.
“What the BoJ really wants to see is strong wage gains helping inflation pick up, but they are not talking much about it because there’s not much hope for wages,” Noguchi said. — AFP
Bank of Japan