BOJ may trim growth and in­fla­tion pro­jec­tions

The Gulf Today - Business - - FRONT PAGE -

TOKYO: Ja­pan’s re­tail sales rose for an 11th con­sec­u­tive month in Septem­ber from a year ear­lier but the pace of gains slowed from the prior month, in a sign pri­vate con­sump­tion may not be strong enough to avoid a broader slow­down in eco­nomic growth.

The trade min­istry’s fig­ures fol­lowed data that showed an un­ex­pected drop in ex­ports in Septem­ber, rais­ing the spec­tre of a marked mod­er­a­tion in eco­nomic growth in July-septem­ber from the pre­vi­ous quar­ter’s solid ex­pan­sion.

An­a­lysts ex­pect the thirdquar­ter slow­down to be tem­po­rary, caused by a string of nat­u­ral disasters that dis­rupted busi­ness and con­sumer ac­tiv­ity in re­cent months.

But the softer growth will add to wider con­cerns about the cen­tral bank’s abil­ity to hit its elu­sive an­nual in­fla­tion tar­get of 2 per cent.

The Bank of Ja­pan will ex­am­ine the data and com­ing in­di­ca­tors such as fac­tory out­put and job­less fig­ures at its board meeting this week, when it up­dates its growth and in­fla­tion pro­jec­tions.

The data feeds into cal­cu­la­tions for gross do­mes­tic prod­uct (GDP) for July-septem­ber, which is due out on Nov.14. “The third-quar­ter GDP likely con­tracted 0.1 per cent as a re­ac­tion to the pre­vi­ous quar­ter’s solid growth,” said Azusa Kato, se­nior econ­o­mist at BNP Paribas Se­cu­ri­ties.

“The BOJ will prob­a­bly trim growth and in­fla­tion pro­jec­tions slightly for the cur­rent fis­cal year, but it won’t move for the fore­see­able fu­ture.”

Septem­ber’s 2.1 per cent an­nual in­crease in re­tail sales beat the Reuters poll me­dian fore­cast for 1.6 per cent, trade min­istry data showed on Mon­day, but it was slower than the 2.7 per cent ex­pan­sion in Au­gust.

Septem­ber’s gains were led by ris­ing gaso­line prices and brisk sales of ma­chine tools, food and bev­er­age pur­chases and cloth­ing, while car sales slipped and on­line re­tail­ers suf­fered a de­cline.

On a sea­son­ally-ad­justed ba­sis, re­tail sales fell 0.2 per cent in Septem­ber from the pre­vi­ous month, fol­low­ing Au­gust’s 0.9 per cent in­crease.

Pri­vate con­sump­tion, which makes up about 60 per cent of eco­nomic ac­tiv­ity, is key to the cen­tral bank’s ef­forts to ac­cel­er­ate in­fla­tion to its 2 per cent tar­get. How­ever, BOJ Gover­nor Haruhiko Kuroda said it will take longer than ini­tially ex­pected to achieve that tar­get.

Ja­pan’s econ­omy grew an an­nu­alised 3.0 per cent in the sec­ond quar­ter, the fastest pace since 2016, led by solid house­hold and busi­ness spend­ing, but risks from global trade ten­sion cloud the out­look for ex­portre­liant Ja­pan. The BOJ is widely ex­pected to keep a pledge to guide short-term in­ter­est rates at mi­nus 0.1 per cent and long-term rates around zero per cent at a two-day rate re­view end­ing on Wed­nes­day.


A sales­girl talks to a cus­tomer at a flower shop in a shop­ping mall in Tokyo, Ja­pan.

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