The Bank of Japan (BoJ) yesterday struck a more upbeat view of the world’s No. 3 economy, saying exports were showing signs of picking up, while factory output has started to “bottom out.”
The comments came after policymakers wrapped up a two-day meeting where they voted by an 8-1 margin to hold off fresh easing measures, after announcing in late October a huge expansion of the BoJ’s asset-buying program.
The yen weakened slightly against the US dollar and euro after the announcement. The Nikkei 225 index at the Tokyo Stock Exchange climbed 411.35 points to 17,621.40, while the Topix index of all first-section shares rose 2.42 percent, or 33.29 points, to 1,409.61 thanks to the weaker yen.
Photo: Reuters
“Japan’s economy has continued to recover moderately as a trend … [while] overseas economies — mainly advanced economies — have been recovering, albeit with a lackluster performance still seen in part,” the BoJ said in a post-meeting statement. “In this situation, exports have shown signs of picking up.”
Private consumption remains “resilient” while real-estate investment has “started to bottom out,” the bank said, echoing its view of factory output, which edged up 0.2 percent month-on-month in October, beating market expectations.
“Business sentiment has generally stayed at a favorable level, although some cautiousness has been observed,” it added.
The announcement came after the BoJ’s quarterly tankan survey this week showed that confidence among major Japanese manufacturers edged down this quarter.
A separate bank report on Thursday highlighted caution among firms that were holding a record amount of cash equivalent to almost half the country’s GDP, despite calls for more wage hikes and capital spending.
Plunging oil prices have helped narrow Japan’s gaping trade deficit, while a sharply weaker yen has been a plus for exporters, but lower energy import prices are also digging into the BoJ’s efforts to reach 2 percent inflation, which is aimed at ending years of deflation and tepid growth.
The BoJ’s decision means it will keep trying to pump cash into the banking system at an annual pace of about ¥80 trillion (US$670 billion), a scheme designed to stimulate the wider economy.
In October, the bank surprised markets by announcing it would expand asset purchases by as much as ¥20 trillion annually to the current level, sending the yen into freefall.
It also slashed its economic growth forecast by half and trimmed consumer price expectations as its much-touted inflation target looked increasingly out of reach — stoking speculation of further easing measures next year.
“Wage growth is set to remain sluggish next year and, with households also likely to be trying to rebuild their savings, we expect consumer spending to be subdued,” Capital Economics said in a note. “This suggests that GDP growth in 2015 will be much weaker than many expect. Weak demand alongside recent falls in commodity prices will weigh on inflation, triggering more easing by the Bank of Japan, perhaps as early as the spring.”
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