Tag Archives: Shinzo Abe

Japan Set to Give Details of $273 Billion Stimulus Package

Bloomberg, Aug 1, 2016

10-yr_japan_bond

* Abe seeks to prop up economy after BOJ keeps action minimal
* Economy minister to keep job in cabinet reshuffle: NHK

Japan’s government is set to announce details Tuesday of a 28 trillion yen ($273 billion) stimulus package, as it seeks to bolster an economy threatened by a strengthening yen and weak consumer spending.

Prime Minister Shinzo Abe flagged the size of the package in a speech last week, saying more investment was needed to expand the world’s third-largest economy. He said funds would be used to provide better port facilities for cruise ships and accelerate the construction of a high-speed maglev train line.

Actual spending will only make up about 7 trillion yen, according to a person familiar with the matter, with the rest consisting of loans and other financing, probably spread over several years. The package is the latest in a long series that have had limited impact on the economy, while Abe’s promise to make structural reforms — tackling areas like immigration and employment regulation — has fallen short of expectations.

The cabinet’s expected approval of the package comes as exporters grapple with the yen’s rise, Britain’s vote to leave the European Union and a slowdown in emerging economies. At the same time, concern is growing that the Bank of Japan is running out of options for further easing, after it made only minor policy adjustments at a meeting last week.

“The fiscal spending will probably include public works spending, so we can expect something of an economic boost,” said Masaki Kuwahara, an economist at Nomura Securities Co. in Tokyo. But such growth may not be sustainable. “What Japan needs to do is to spur more demand and increase productivity by pushing through deregulation, increasing the nation’s potential growth rate.”

Abe is seeking to expand the economy by 20 percent by 2020. To do so, he’s pledged measures to bolster household incomes, increase the birth rate and provide more care facilities for children and the elderly.

After announcing in June he would put off an increase in the sales tax, he promised last week to tap reserves in the unemployment insurance fund to lower premiums and increase payouts.

Cash Handouts

Natsuo Yamaguchi, leader of Abe’s junior coalition partner Komeito, told reporters on Tuesday after a meeting with Abe that the budget measures in the package would amount to 13.5 trillion yen and the stimulus would boost gross domestic product by about 1.3 percent.

NHK reported last week the package — the second to be compiled in the current fiscal year — would include cash handouts of 15,000 yen for those on low incomes, with 10.7 trillion yen set aside for infrastructure spending and 10.9 trillion yen to help smaller companies weather the impact of Brexit.

Exporters have suffered as the yen soared over the past six months from more than 120 yen to the dollar to about 103. Panasonic Corp. last week partly blamed the strong yen for a fall in quarterly profit. Household spending has dropped in 10 of the past 12 months.

The package comes the day before a minor cabinet reshuffle in which most senior ministers are expected to keep their posts. Economy Minister Nobuteru Ishihara will stay on, NHK reported, after speculation he might be replaced following the defeat of Abe’s candidate in the weekend election for Tokyo governor. Finance Minister Taro Aso and Chief Cabinet Secretary Yoshihide Suga will keep their jobs, according to local media.

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Japan inflation cools, household spending and incomes soften

AP, Mar 27, 2015

Japan reports inflation, household spending, wages soften in Feb in sluggish recovery.

Japan reported lackluster inflation and wages data for February that suggested Friday that its economic recovery remains in the doldrums.

Core inflation excluding volatile food prices was 2.0 percent in February, down from 2.2 percent in January. Excluding the impact of an April 2014 sales tax hike, inflation was flat.

Prime Minister Shinzo Abe has sought to spur growth through extreme monetary easing by the central bank that is meant to drive prices higher, prompting consumers and businesses to accelerate their spending.

But sluggish wage growth, coupled with the tax hike, has hurt consumers’ purchasing power. Household spending fell 2.9 percent from a year earlier in February, while base wages slipped 1.9 percent, the 13th straight monthly decline.

The increase in the sales tax, to 8 percent from 5 percent, took much of the steam out of a recovery that gained momentum in 2013 but stalled after the tax hike, falling into a half-year contraction. The economy emerged from recession late last year but appears wobbly, based on data from the past several months.

In a positive sign from the latest data, unemployment fell to 3.5 percent in February from 3.6 percent the month before.

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Japan emerges from recession but growth subdued

Reuters, Feb 15, 2015

Japan’s economy rebounded from recession in the final quarter of last year but growth was weaker than expected as household and corporate spending disappointed, underlining the challenge premier Shinzo Abe faces in shaking off decades of stagnation.

The annualized 2.2 percent expansion in October-December was smaller than a 3.7 percent increase forecast in a Reuters poll, suggesting a fragile recovery as the hangover from last year’s sales tax hike lingered.

The preliminary reading for gross domestic product (GDP), which translates into a quarter-on-quarter increase of 0.6 percent, follows two straight quarters of contraction, data by the Cabinet Office showed on Monday.

Economic Minister Akira Amari told reporters after the data’s release that the economy was on track for a recovery with signs consumer sentiment is picking up.

But analysts pointed to the weak rebound in consumption and capital expenditure as worrying signs to the outlook.

“These are somewhat disappointing figures,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “The situation remains weak and companies are clearly postponing investments.”

BOJ ON HOLD
The rebound from recession, however, will allow the Bank of Japan to hold off on expanding monetary stimulus for now even as slumping oil prices push inflation further away from its 2 percent target, analysts say.

“The BOJ is expected to keep monetary policy unchanged for a while to see the impact from the latest easing,” said Taro Saito, director of economic research at NLI Research Institute.

The data will be one of the key factors the BOJ will scrutinize at its two-day rate review ending on Wednesday, where it is widely set to maintain the current pace of asset purchases in its monetary stimulus program.

External demand added 0.2 percentage point to growth in the October-December quarter on robust shipments to the United States and China, Japan’s two biggest export destinations.

But private consumption, which makes up about 60 percent of the economy, rose 0.3 percent in the final quarter, less than a median market forecast for a 0.7 percent increase.

Capital expenditure also rose just 0.1 percent after two straight quarters of declines, suggesting the BOJ’s aggressive money printing has yet to nudge firms into boosting investment.

Japan’s economy slid into recession in July-September last year, prompting Abe to delay a second sales tax hike initially scheduled in October 2015.

The slump slowed Japan’s quest to beat off nearly two decades of grinding deflation, and forced the BOJ into expanding monetary stimulus in October last year.

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