The Bank of Japan (BOJ) yesterday took a brighter view of the economy and left its main policy settings unchanged, offering a further indication that it is unlikely to add to its stimulus.
As had been widely expected, the BOJ raised its growth projections for the first time in a year, thanks to Japanese Prime Minister Shinzo Abe’s US$120 billion economic package, unveiled last month.
However, the bank also trimmed its inflation forecasts, a move that might raise fresh questions about how economic growth feeds into prices at a time when central bankers around the world are reassessing their targets, methodology and wider issues.
The central bank said that while overseas risks to the economy remained significant, they had decreased somewhat.
It said it would not hesitate to take additional easing action if risks increased.
“The BOJ is trying to avoid sending a message that it’s getting confident about the economy or it’s starting to seek adjustments to its easing bias,” said Nobuyasu Atago, chief economist at Okasan Securities Group Inc and former head of the BOJ’s price statistics division. “The bottom line is that the BOJ is comfortable with the current yen level and it doesn’t want to change that by indicating optimism or a change in its cautious view.”
While Japan’s economy is expected to have contracted sharply in the final three months of last year following a destructive super typhoon and a sales tax hike that cooled spending, the trajectory for this year now looks less gloomy.
A slump in overseas demand might have bottomed and the Abe administration’s stimulus is set to give the economy a shot in the arm.
The fiscal injection looks sufficient to help get growth back on track this year and remove the need for additional action by a central bank already stretched close to the limits of its policy toolkit, and facing mounting costs of its easing program.
The BOJ expects the economy to expand 0.9 percent in the year starting in April, compared with a 0.7 percent forecast in October last year, citing the effects of the government’s measures, but expects inflation of only 1 percent, down from its previous projection.
The BOJ’s upgraded growth forecast positions it between the view of private economists and the more optimistic 1.4 percent projection of the government.
Still, economists cast doubt on how growth can strengthen while prices weaken.
“If you take a step back, they are forecasting inflation of only 1.4 percent even in fiscal 2021. That’s very weak after years of massive easing and I think it’s coming to a stage where they need to rethink the price target. I wouldn’t be surprised if that discussion takes place this year as the [US Federal Reserve] and ECB [the European Central Bank] are also discussing theirs,” Atago said.
NOTABLE SHIFT: By 2030, 50% of all laptops would be assembled in Southeast Asia, while Taiwan would still mostly focus on research and development, a report said Global laptop and desktop computer supply chains are expected to shift significantly away from China in the next 10 years, a Market Intelligence & Consulting Institute (MIC, 產業情報研究所) report said. By 2030, only 40 percent of global laptop production would remain in China, said the report, which was released on Thursday. “The reshuffling of the global supply chain will be one of the most important trends in the next 10 years,” the institute said in the report. “In the long run, key component makers will follow laptop assemblers in moving out of China.” The Taipei-based institute predicted most key component makers
Merck Group Taiwan yesterday said that it plans to invest substantially on expanding its fab in Kaohsiung’s Lujhu District (路竹) to better serve its local customers, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電). The company said it plans to expand its production space by 50 percent in the next five years and its workforce by about 40 percent, Merck Group Taiwan managing director Dick Hsieh (謝志宏) told a media briefing in Taipei. Hsieh declined to disclose investment details, but said that the latest investment would exceed the total amount Merck has invested in Taiwan over the past few years. Those investments would be
Yageo Corp (國巨), the world’s third-largest supplier of multilayer ceramic capacitors, has formed a strategic alliance with Hon Hai Precision Industry Co (鴻海精密) to develop key electronic components for electric vehicles and digital healthcare, it said yesterday. The alliance is to help Yageo boost its revenue from high-end components for vehicles and industrial, medical and aerospace devices, as well as those used in 5G and Internet-of-Things devices, the company said. The companies signed the strategic alliance agreement at Yageo’s headquarters in New Taipei City’s Sindian District (新店). Their cooperation is to start this quarter, the companies said in a joint statement. “Through the cooperation
SUPPLY CONSTRAINTS: The transferred orders might not provide an immediate revenue boost given local chipmakers’ high utilization rates, a senior analyst said Shares of local contract chipmakers yesterday rose as much as the 10 percent daily limit, as investors bet on orders being transferred from Semiconductor Manufacturing International Corp (SMIC, 中芯國際) after the US imposed export restrictions on the Chinese chipmaker. United Microelectronics Corp (UMC, 聯電) shares soared 10 percent to close at NT$27.5 as 380 million shares changed hands on the Taiwan Stock Exchange. UMC is the world’s No. 3 foundry by revenue, followed by SMIC, according to data from market researcher TrendForce Corp (集邦科技). UMC has product and customer portfolios similar to those of SMIC, TrendForce said, adding that UMC offers 14-nanometer and