De­fla­tion a real threat for Ja­pan

The Myanmar Times - - International Business -

THE In­ter­na­tional Mon­e­tary Fund lifted its out­look for Ja­pan’s econ­omy this year and in 2017, point­ing to huge govern­ment stim­u­lus spend­ing, but warned the coun­try’s longer-term prospects were bleak.

The IMF up­graded its growth pro­jec­tions for the world’s num­ber-three econ­omy to 0.5 per­cent in 2016 and 0.6pc next year, up from a July fore­cast of 0.3pc and 0.1pc, re­spec­tively.

But the up­grade was largely due to an ex­pected shot in the arm from a whop­ping 28 trillion yen (US$273 bil­lion) govern­ment spend­ing pack­age an­nounced in Au­gust, as well as a de­ci­sion to de­lay a con­sump­tion tax hike, the Fund said.

“Ja­pan’s medium-term prospects re­main weak, pri­mar­ily re­flect­ing a shrink­ing pop­u­la­tion,” the IMF said in its lat­est World Eco­nomic Out­look.

“The prob­a­bil­ity of de­fla­tion has in­creased in Ja­pan ow­ing to weak mo­men­tum in con­sumer prices and the re­cent ap­pre­ci­a­tion of the yen.”

Of­fi­cials are un­der in­tense pres­sure to de­liver a boost to the econ­omy as economists in­creas­ingly write off Prime Min­is­ter Shinzo Abe’s spend­for-growth poli­cies.

Weak­ness in economies over­seas and a strong yen, which is bad for Ja­pan’s ex­porters, are weigh­ing down growth, the Fund said.

The Bank of Ja­pan’s huge mon­e­tary eas­ing will help prop up growth for now, but would do lit­tle to fix broader prob­lems, it added.

Among them are low birthrates and a shrink­ing labour force, while a soar­ing pop­u­la­tion of old peo­ple squeezes the pub­lic purse. Wages are stag­nant, spend­ing is fal­ter­ing, and con­sumer prices are way be­low the cen­tral bank’s 2pc in­fla­tion tar­get.

The IMF also called for Tokyo to rein in a na­tional debt that is now more than two times the size of the econ­omy – one of the world’s big­gest debt loads. –

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