The Bank of Japan (BOJ) yesterday upgraded its assessment of the world’s No. 3 economy, saying recovery was firmly under way as Tokyo works to reverse years of lumbering growth.
The announcement comes as the government considers whether to go ahead with a planned sales tax hike that many fear could derail any recovery.
Central bank policymakers said “Japan’s economy is recovering moderately” and held off expanding a massive stimulus program unveiled in April that has been credited with kickstarting growth and pushing down the value of the yen, in turn boosting exporters.
The bank’s bond-buying scheme is a key part of Japanese Prime Minister Shinzo Abe’s plan to reinvigorate the long-suffering economy, dubbed “Abenomics,” which also includes huge government spending.
Its comments were a step up from July, when it said the economy was “starting to recover moderately.”
The bank added that overseas economies “as a whole are gradually heading toward a pick-up,” providing a fillip to exporters. The brighter global outlook, as well as an ongoing weakening of the yen, has helped boost Japan’s shipments to key markets.
It also said key indicators including business investment and consumer demand were looking brighter. The yen slipped against the US dollar in Asian trade after the BOJ’s announcement. The greenback bought ￥99.95 in afternoon trading, against ￥99.74 in New York on Wednesday afternoon, while the euro was flat at ￥131.70. The unit has lost about a fifth of its value against the greenback since Abe set out his monetary-driven policy at the start of the year.
While the bank did not unveil any fresh measures yesterday, it hinted that further moves could be in the offing depending on inflation.
We will “examine both upside and downside risks to economic activity and prices, and make adjustments as appropriate,” it said.
The comments come as Tokyo weighs a plan to double sales tax to 10 percent by 2015.
While the plan is seen as crucial to bringing down Japan’s staggering national debt — proportionately the worst among industrialized nations at more than twice the size of the economy — some fear higher taxes will hit consumer demand and blunt any recovery.