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☆ Analysis-China's economic gloom hangs over Japan's long-awaited recovery
▼ + stars: | 2023-09-06 | by ( Tetsushi Kajimoto | Leika Kihara | ) www.reuters.com time to read: +5 min

TOKYO (Reuters) - Policymakers in Tokyo believe China’s deepening economic woes could hit Japan’s fragile recovery, especially if Beijing fails to shore up demand with meaningful stimulus, potentially delaying an exit from ultra-loose monetary policy. China is Japan’s largest trading partner, accounting for 20% of its exports, having replaced the United States in 2020. “Exports to China had already been weak and headwinds to inbound tourism are clearly bad for Japan’s economy,” said Toru Suehiro, chief economist at Daiwa Securities. Firms also promised wage hikes unseen in three decades this year, heightening the case for a retreat from decades of ultra-loose monetary policy. The darkening outlook for Japan’s recovery may push back the timing of a BOJ policy shift.

Persons: Marko Djurica, Kazuo Ueda’s, ”, Hiroyuki Ogawa, Ogawa, Takeshi Niinami, Toru Suehiro, Ueda, Toyoaki Nakamura, “, Seisaku Kameda Organizations: REUTERS, Bank of Japan’s, Reuters, Japan, Komatsu Ltd, Komatsu, Suntory Holdings, Daiwa Securities, Japan’s Sompo Holdings Locations: TOKYO, Tokyo, Beijing, Japan, United States, China

In a sign of growing pessimism over China, the government also said its monthly economic report for August that "concern over China's outlook" was among risks to Japan's recovery. "Exports to China had already been weak and headwinds to inbound tourism are clearly bad for Japan's economy," said Toru Suehiro, chief economist at Daiwa Securities. "All in all, it's hard to justify tightening monetary policy any time soon." Firms also promised wage hikes unseen in three decades this year, heightening the case for a retreat from decades of ultra-loose monetary policy. The darkening outlook for Japan's recovery may push back the timing of a BOJ policy shift.

Persons: Marko Djurica, Kazuo Ueda's, Hiroyuki Ogawa, Ogawa, Takeshi Niinami, Toru Suehiro, Ueda, Toyoaki Nakamura, Seisaku Kameda, Tetsushi Kajimoto, Sam Holmes Organizations: REUTERS, Bank of Japan's, Reuters, Japan, Komatsu Ltd, Komatsu, Suntory Holdings, Daiwa Securities, Japan's Sompo Holdings, Thomson Locations: Tokyo, Japan, China, TOKYO, Beijing, United States

Yet, with services price growth also slowing last month, policymakers will feel that wage pressures have yet to build up enough to warrant an imminent tweak to the ultra-loose monetary stance. We'll likely see inflation slow in coming months, which would allow the BOJ to keep policy steady for the time being," said Toru Suehiro, chief economist at Daiwa Securities. "While services prices may rise next year, those for goods will stay weak. "If more firms hike wages and pass on the cost, services prices could overshoot," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. "Inflation excluding food and energy will likely moderate ahead, but the pace of slowdown could be gradual."

Persons: We'll, Toru Suehiro, Kazuo Ueda, Yoshiki Shinke, Leika Kihara, Takahiko Wada, Sam Holmes Organizations: Bank of Japan, Daiwa Securities, Reuters Graphics Services, Dai, Research, Thomson Locations: TOKYO, Japan

The package, which Kishida is likely to explain at a press conference, may help his party appeal to the public with promises of payouts. Kishida has said he hopes to double child care spending, now about 4.7 trillion yen ($33.7 billion), by the early 2030s. Under the plan, the government is likely to earmark about 3.5 trillion yen annually for the next three years for child care allowances and support for those taking child care leave. Analysts, however, doubt whether the package will do much to stem a chronic decline in the birthrate and Japan's rapidly ageing population. ($1=139.4600 yen)Reporting by Takaya Yamaguchi and Tetsushi Kajimoto; Editing by Leika Kihara and Clarence FernandezOur Standards: The Thomson Reuters Trust Principles.

Persons: Fumio Kishida, Kishida, Toru Suehiro, Japan's birthrate, Takaya Yamaguchi, Leika Kihara, Clarence Fernandez Organizations: Reuters, Analysts, Daiwa Securities, Thomson Locations: TOKYO

It will be a tug-of-war between robust domestic demand and sluggish exports," he said. The growth followed a 0.1% fall in the final quarter of last year, which was revised down from a 0.1% rise. Japan economy expands more than expectedPrivate consumption, which makes up more than half the economy, grew 0.6% in January-March from the previous quarter, as the country's re-opening from the pandemic boosted service spending. The strength in domestic demand offset weakness in exports, which slumped 4.2% in January-March, marking the first decline in six quarters. External demand, or net exports, shaved 0.3% percentage point off gross domestic product (GDP), highlighting the strain on manufacturers from slowing overseas growth.

[1/3] FILE PHOTO-A woman in a traditional costume makes her way at a shopping district in Tokyo, Japan November 15, 2022. "From a negative growth in July-September, the rebound isn't very impressive," said Toru Suehiro, chief economist at Daiwa Securities. But it's difficult to project a strong recovery partly due to pressure from rising inflation," he said. RECESSION RISKSFor the full year, the economy expanded 1.1% compared with a 2.1% increase in 2021, the data showed. Economy minister Shigeyuki Goto told reporters the economy was on course for a recovery as the pandemic's impact fades.

"This step will allow us to push down longer-term interest rates, without directly affecting supply and demand of the cash Japanese government bond (JGB) market," Kuroda told a news conference. Following its two-day policy meeting, the BOJ kept intact its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and around 0% for the 10-year yield, by a unanimous vote. Reuters Graphics Reuters GraphicsThe central bank also made no change to its guidance that allows the 10-year bond yield to move 50 basis points either side of its 0% target. "By showing its resolve to use market tools more flexibly, the BOJ wanted to signal to markets it won't make big monetary policy changes under Kuroda." Market attention is already shifting toward monetary policy under Kuroda's successor, who will need to steer an orderly exit from decades of ultra-low rates.

☆ Japan to consider revising Abe-era deflation fighting mandate - sources
▼ + stars: | 2022-12-19 | by ( Tetsushi Kajimoto | Leika Kihara | ) www.reuters.com time to read: +5 min

TOKYO (Reuters) - Japan next year will consider revising its decade-old blueprint for fighting deflation, sources said, as financial markets bet that a weak yen and rising consumer prices will force the central bank to finally drop its ultra-loose monetary policy. The pledge has served as the backbone of Kuroda’s radical monetary stimulus and justification for keeping Japan’s interest rates ultra-low, even as other central banks tighten monetary policy to combat stubbornly high inflation. Kyodo news agency reported on Saturday that the government is set to revise the joint statement to make the BOJ’s inflation target a more flexible goal, with some leeway. SHIFTING FOCUSA revision to the joint statement would mark the final nail in the coffin for former premier’s Abenomics stimulus programme, which relied heavily on Kuroda’s massive stimulus to pull Japan out of deflation. Analysts say any revision that waters down the status of the BOJ’s 2% inflation target could serve as a trigger for phasing out Kuroda’s stimulus programme.

☆ Japan considers steps to help with utility bill burden
▼ + stars: | 2022-09-29 | by ( Leika Kihara | Takahiko Wada | ) www.reuters.com time to read: +3 min

TOKYO (Reuters) -Japan will consider more steps to cushion the blow of rising electricity bills, a government spokesperson said on Thursday, underscoring the pressure it faces in addressing the burden on households of higher prices for imports from a weak yen. “We’ll scrutinise developments of electricity bills and consider whether further steps could be necessary,” he said. The government is expected to announce a package of measures to cushion rising inflation next month, which is likely to be funded by another supplementary budget. “If the government does take steps to curb utility bills, that will put some downward pressure on consumer inflation,” said Toru Suehiro, chief economist at Daiwa Securities. BOJ Governor Haruhiko Kuroda has ruled out raising Japan’s ultra-low interest rates any time soon, arguing that core consumer inflation would ease back below 2% next fiscal year when cost-push factors dissipate.

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