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05-09-2013, 04:50 PM
BOJ maintains stimulus, says economy recovering
TOKYO - The Bank of Japan declared the world’s third-largest economy is recovering as it voted on Thursday to maintain its monetary stimulus, offering a more upbeat view than last month on growing signs the benefits of its expansionary policy are broadening.
A slew of positive data has underscored the view that robust household spending and the feel-good mood generated by Prime Minister Shinzo Abe’s pro-growth policies are gradually prompting companies to increase capital spending and hiring.
The BOJ’s upgraded view may heighten the case for Mr Abe to go ahead with a planned sales tax hike from next year, a move seen as necessary to start reining in Japan’s huge public debt.
As widely expected, the central bank voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion yen (S$765.8 billion) to 70 trillion yen.
“Japan’s economy is recovering moderately,” the BOJ said in a statement, revising up its assessment from August when it said the economy was “starting to recover moderately.”
The government is leaning toward raising the tax as planned from April and cushioning the impact with fiscal stimulus. The central bank may also come under pressure to act, although it is in no mood to ease pre-emptively to counter the expected drag on growth.
“The BOJ’s upgrade seems appropriate because revised GDP is likely to show that capital expenditure turned positive,” said Mr Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
“Our main scenario is that the BOJ will ease again around the time of the first tax hike next year. There are risks from the Middle East and overseas economies, but if the BOJ eases again it will be for domestic reasons.”
Japan emerged from recession in 2012 and data for much of this year has shown the benefits of Mr Abe’s reflationary policies and the BOJ’s aggressive stimulus.
Recent data have been particularly encouraging, with the jobless rate at the lowest in almost five years, summer bonuses increasing and core consumer prices rising at the fastest pace in nearly five years.
Finance ministry data on Monday also showed a healthy increase in corporate capital spending, pointing to a sharp upward revision to second-quarter GDP data due next week from a preliminary 2.6 per cent expansion.
That gives advocates of the tax hike ammunition to counter the views of opponents that Japan should delay or water down the tax increases to prevent the economy from faltering again.
Unless Mr Abe changes the plan, the sales tax will be raised to 8 per cent from 5 per cent in April and to 10 per cent in October 2015. He will decide early next month, taking into account the BOJ’s “tankan” business sentiment survey due on Oct 1.
Bank of Japan Governor Haruhiko Kuroda said on Thursday that the central bank stands ready to take further monetary easing steps if a planned sales tax hike or other risks derail the economy on its path to achieving the bank’s 2 per cent inflation target.
But for now the central bank sees no need to take additional stimulus steps, with Japan’s economy and prices moving in line with its forecasts, Mr Kuroda told a news conference.
“Japan’s economy is likely to continue recovering moderately as a positive cycle of output, income and expenditure kicks in,” he said. REUTERS
http://www.todayonline.com/business/boj-...recovering
TOKYO - The Bank of Japan declared the world’s third-largest economy is recovering as it voted on Thursday to maintain its monetary stimulus, offering a more upbeat view than last month on growing signs the benefits of its expansionary policy are broadening.
A slew of positive data has underscored the view that robust household spending and the feel-good mood generated by Prime Minister Shinzo Abe’s pro-growth policies are gradually prompting companies to increase capital spending and hiring.
The BOJ’s upgraded view may heighten the case for Mr Abe to go ahead with a planned sales tax hike from next year, a move seen as necessary to start reining in Japan’s huge public debt.
As widely expected, the central bank voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of 60 trillion yen (S$765.8 billion) to 70 trillion yen.
“Japan’s economy is recovering moderately,” the BOJ said in a statement, revising up its assessment from August when it said the economy was “starting to recover moderately.”
The government is leaning toward raising the tax as planned from April and cushioning the impact with fiscal stimulus. The central bank may also come under pressure to act, although it is in no mood to ease pre-emptively to counter the expected drag on growth.
“The BOJ’s upgrade seems appropriate because revised GDP is likely to show that capital expenditure turned positive,” said Mr Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
“Our main scenario is that the BOJ will ease again around the time of the first tax hike next year. There are risks from the Middle East and overseas economies, but if the BOJ eases again it will be for domestic reasons.”
Japan emerged from recession in 2012 and data for much of this year has shown the benefits of Mr Abe’s reflationary policies and the BOJ’s aggressive stimulus.
Recent data have been particularly encouraging, with the jobless rate at the lowest in almost five years, summer bonuses increasing and core consumer prices rising at the fastest pace in nearly five years.
Finance ministry data on Monday also showed a healthy increase in corporate capital spending, pointing to a sharp upward revision to second-quarter GDP data due next week from a preliminary 2.6 per cent expansion.
That gives advocates of the tax hike ammunition to counter the views of opponents that Japan should delay or water down the tax increases to prevent the economy from faltering again.
Unless Mr Abe changes the plan, the sales tax will be raised to 8 per cent from 5 per cent in April and to 10 per cent in October 2015. He will decide early next month, taking into account the BOJ’s “tankan” business sentiment survey due on Oct 1.
Bank of Japan Governor Haruhiko Kuroda said on Thursday that the central bank stands ready to take further monetary easing steps if a planned sales tax hike or other risks derail the economy on its path to achieving the bank’s 2 per cent inflation target.
But for now the central bank sees no need to take additional stimulus steps, with Japan’s economy and prices moving in line with its forecasts, Mr Kuroda told a news conference.
“Japan’s economy is likely to continue recovering moderately as a positive cycle of output, income and expenditure kicks in,” he said. REUTERS
http://www.todayonline.com/business/boj-...recovering
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