Big busi­ness not con­vinced of up­swing

The Myanmar Times - - International Business -

BUSI­NESS con­fi­dence among Ja­pan’s largest man­u­fac­tur­ers is at its low­est since Tokyo in­tro­duced mea­sures to kick-start the strug­gling econ­omy more than three years ago, a cen­tral bank sur­vey showed yes­ter­day.

The Bank of Ja­pan’s closely watched Tankan re­port comes af­ter data show­ing weak growth in the sec­ond quar­ter and as soft in­fla­tion and spend­ing fig­ures un­der­scored the wob­bly re­cov­ery.

The lat­est Tankan – a key gauge of Ja­pan Inc’s health – missed mar­ket fore­casts for a slight im­prove­ment in the mood among ma­jor firms.

Sen­ti­ment among big man­u­fac­tur­ers is wal­low­ing at its low­est lev­els since Prime Min­is­ter Shinzo Abe kicked off his growth blitz, dubbed Abe­nomics, in 2013.

The sur­vey con­tra­dicts Tokyo’s view that the world’s num­ber three econ­omy is on the up­swing, said Satoshi Osanai, se­nior econ­o­mist at Daiwa In­sti­tute of Re­search.

“The econ­omy is weak and not in a re­cov­ery mode,” he added.

“This is more con­fir­ma­tion that Ja­panese firms are fac­ing head­winds. Con­di­tions re­main tough.”

The BoJ’s quar­terly sur­vey of more than 10,000 com­pa­nies is the most com­pre­hen­sive in­di­ca­tor of how Ja­pan is far­ing. It marks the dif­fer­ence be­tween the per­cent­age of firms that are up­beat and those that see con­di­tions as un­favourable.

The read­ing for big man­u­fac­tur­ers was un­changed at 6, while the level for big non-man­u­fac­tur­ers fell to 18 from 19. How­ever, con­fi­dence among medium and small busi­ness im­proved slightly.

Of­fi­cials are un­der in­tense pres­sure to de­liver a boost to the econ­omy with experts in­creas­ingly writ­ing off Tokyo’s spend-for-growth pol­icy.

On Septem­ber 30, of­fi­cial data showed spend­ing among Ja­panese house­holds tum­bled in Au­gust and con­sumer prices fell again – putting the Bank of Ja­pan’s 2pc in­fla­tion tar­get fur­ther out of reach.

The tar­get is a cor­ner­stone of Prime Min­is­ter Abe’s fal­ter­ing at­tempts to kick­start growth.

Last month, the Bank of Ja­pan, which launched a mas­sive bond-pur­chase stim­u­lus pro­gram in 2013, re­vealed yet an­other ex­otic weapon in its mon­e­tary pol­icy arse­nal.

Af­ter a hotly an­tic­i­pated meet­ing, the bank said it would switch its em­pha­sis from in­ter­est rates and con­cen­trate its fire­power on 10-year govern­ment bonds.

Gov­er­nor Haruhiko Kuroda said the bank would buy as many or as few of these bench­mark in­stru­ments as nec­es­sary to en­sure the yield – the in­ter­est rate paid to hold­ers – re­mained steady at around zero.

The bank said it would cut back on the num­ber of longer dated bonds the bank holds. That should re­duce the price of long-term se­cu­ri­ties, which – in turn – should in­crease their yield. It was the lat­est ef­fort to con­vince Ja­panese con­sumers that the price of goods and ser­vices will rise.

Some an­a­lysts, how­ever, said the move was an ad­mis­sion of de­feat in the war on de­fla­tion and a warn­ing of the lim­its of cen­tral bank power.

“I’m sure the Bank of Ja­pan was hop­ing for a re­bound in the lat­est Tankan – they must be in agony look­ing at this re­port,” said Hideo Ku­mano, an econ­o­mist at Dai­ichi Life Re­search In­sti­tute.

Tokyo in July an­nounced a whop­ping 28 tril­lion yen (US$280 bil­lion) pack­age aimed at kick-start­ing growth, af­ter Bri­tain’s June vote to quit the Euro­pean Union sent fi­nan­cial mar­kets into a tail­spin and sparked a yen rally.

But Mr Abe’s prom­ises to cut through red tape have been slower, and his plan to buoy Ja­pan’s on­ce­boom­ing econ­omy have looked in­creas­ingly un­re­al­is­tic.

The econ­omy con­tracted in the last three months of 2015 be­fore bounc­ing back in Jan­uary-March with a 0.5pc rise on-quar­ter and then a 0.2pc growth in April-June.

Photo: AFP

Shinzo Abe’s at­tempts at kick-start­ing the econ­omy are not work­ing.

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