BoJ lifts growth forecasts on global outlook
TOKYO: Japan’s central bank hiked its economic growth forecasts yesterday, citing an improved global outlook and a weaker yen but the country’s finance 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 monetary-easing measures, though earlier spending data highlighted the challenge facing officials trying to refire the world’s number-three economy. The BoJ tipped expansion to hit 1.4 percent in the current fiscal year to March, compared with its previous one percent estimate, and 1.5 percent growth in the following 12 months, from its earlier 1.3 percent forecast.
In the year to March 2019 it saw 1.1 percent growth, up from an initially flagged 0.9 percent. “The projected growth rates are somewhat higher, mainly reflecting improvement in overseas economies and the yen’s depreciation,” the bank said in its quarterly outlook. The yen has lost about 10 percent 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.
Focus on Trump
Yesterday Japanese Finance Minister Taro Aso told parliament: “The economy is a living thing and Trump uncertainty has emerged and is globally recognized.” However, he stressed the yen’s weakness would continue well into this year, at least as he sought to reassure over the domestic economy’s outlook. While the BoJ did not explicitly mention Trump in its report, the future in a world with the real-estate 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.
Kuroda, asked at a press conference about Trump’s economic policies, said he would like to “closely monitor” them. “There are concerns that protectionism might shrink global trade and slow the speed of growth of the world economy,” he said. “But the importance of free trade is internationally recognized via the G7, the G20, the WTO and the IMF. So I don’t think protectionism is likely to spread vigorously and widely in the world.”
Trump has called, among other things, for taxes on some imports into the US and has targeted domestic and foreign companies with them if they set up factories in places such as Mexico.
Earlier Tuesday figures showed household spending fell in December for the 10th consecutive month, declining 0.3 percent, although that was better than expectations of 0.9 percent. 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 percent target. Kuroda said it was “too early” to discuss exiting current monetary policy. — AFP