Ja­pan elec­tion may cur­tail stim­u­lus as re­ces­sion looms

The Pak Banker - - Front Page -


The Ja­panese Prime Min­is­ter Yoshi­hiko Noda’s de­ci­sion to call an elec­tion in De­cem­ber may in­hibit the gov­ern­ment’s abil­ity to stim­u­late an econ­omy that’s slid­ing to­ward its third re­ces­sion in four years.

Com­pil­ing an ex­tra bud­get soon will be “dif­fi­cult” as law­mak­ers can­not de­bate spend­ing with the Diet dis­solved, Econ­omy Min­is­ter Seiji Mae­hara said this week. Stim­u­lus us­ing re­serve funds won’t be enough to sup­port the econ­omy, he said in Tokyo to­day. Draft­ing of next fis­cal year’s main bud­get may be de­layed, Fi­nance Min­is­ter Koriki Jo­jima said this week.

Con­straints on gov­ern­ment ac­tion add ex­tra pres­sure for loos­en­ing by the Bank of Ja­pan (8301) to spur growth, counter de­fla­tion and weaken the yen. Op­po­si­tion leader Shinzo Abe’s call yes­ter­day for un­lim­ited eas­ing had a big­ger ef­fect on the cur­rency than the cen­tral bank’s most re­cent eas­ing on Oct. 30, send­ing the yen to a six-month low against the dol­lar.

“There’s a risk that the re­ces­sion which should be for two quar­ters could last for three or even four,” said Ju­nichi Makino, chief econ­o­mist in Tokyo at SMBC Nikko Se­cu­ri­ties Inc., a unit of Ja­pan’s sec­ond-largest bank by mar­ket value, cit­ing the risk of bud­get de­lays.

Noda will dis­solve the lower house of par­lia­ment to­day af­ter the up­per house passed a bill to is­sue bonds to fi­nance spend­ing for the rest of this fis­cal year, fol­low­ing a months- long im­passe that left the gov­ern­ment weeks away from run­ning out of money. The elec­tion will be held on Dec. 16.

Jo­jima to­day pledged an­other round of stim­u­lus us­ing re­serve funds from this year’s bud­get af­ter an­nounc­ing 400 bil­lion yen ($4.9 bil­lion) of mea­sures last month.

The gov­ern­ment to­day down­graded its view of the econ­omy for a fourth month, the long­est streak since the global fi­nan­cial cri­sis as ex­ports fall and de­mand weak­ens. Pana­sonic Corp. (6752) this week said it plans to cut 8,000 jobs. Ja­pan’s econ­omy shrank an an­nu­al­ized 3.5 per­cent last quar­ter and will con­tract 0.4 per­cent in this three-month pe­riod, ac­cord­ing to the me­dian of 24 es­ti­mates in a Bloomberg sur­vey, the third tech­ni­cal re­ces­sion since 2008. Ja­panese re­ces­sions are of­fi­cially de­fined by a gov­ern­ment-charged panel that con­sid­ers data be­yond GDP fig­ures.

Ja­pan’s Topix In­dex is headed for the big­gest two-day gain in more than a year on spec­u­la­tion that the elec­tion will be fol­lowed by more ag­gres­sive mone­tary ac­tion.

The Topix was 1.9 per­cent higher at 2:18 p.m.in Tokyo, with more than two shares ad­vanc­ing for each that fell. The gauge has gained more than 3.7 per­cent in the two days since elec­tions were called. The Nikkei 225 Stock Av­er­age climbed 2.1 per­cent, with vol­ume more than 60 per­cent above the 30-day av­er­age. Abe, the leader of the Lib­eral Demo­cratic Party, yes­ter­day called for un­lim­ited eas­ing un­til de­fla­tion is ended.


PARIS: French Pres­i­dent Fran­cois Hol­lande, left , meets with Niger’s Pres­i­dent Ma­hamadou Is­soufou prior to a meet­ing in El­y­see Palace.

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