Japan says economy’s condition stable, but weak

REUTERS: Japan’s economic condition stopped worsening, the outgoing government said on Friday in a monthly report, but it remains weak enough to justify a nudge from monetary and fiscal stimulus planned by the newly elected administration.

In the last monthly assessment produced before Shinzo Abe’s cabinet takes over on December 26, the government kept its assessment of the economy’s condition unchanged, snapping a four-month run of downgrades that was the longest such sequence since the 2008-09 financial crisis.

It said, the Japanese economy showed “weakness recently due to deceleration of the world economy”, using the same phrase as in November.

“There are some bright spots here and there, but overall, the economy remains weak and we can’t be optimistic,” a Cabinet Office official in charge of compiling the monthly report told reporters.

“Companies, especially manufacturers, continue to operate in a tough environment and their profits are sluggish, with a drop in exports weighing on production and business sentiment.”

The report, followed the Bank of Japan’s third shot of monetary stimulus in four months and its fifth this year, mainly in response to growing pressure from incoming Prime Minister Shinzo Abe for bolder action to beat deflation.

But a further 10 trillion yen ($118.50 billion) addition to the BOJ’s asset buying and lending pot also reflected the central bank’s concern about sagging business confidence apparent in its latest Tankan business survey, economists said.

There is, however, scepticism over how quickly Abe’s promised mix of a public spending splurge and aggressive monetary stimulus can translate into a pick-up in growth.

With the yen just above 20-month lows and a 10 percent stock market rally in the past month, markets have already factored in further, possibly intensified BOJ easing in coming months. On Thursday, the central bank signalled it would raise its price goal next month in response to Abe’s call for a binding 2 percent inflation target.