TOKYO: Japanese business confidence was subdued in the second quarter and consumer prices fell in May at the fastest pace in three years, heightening pressure on the central bank to roll out yet more stimulus to ease the pain from a strong yen.
The government is also seen increasing fiscal spending as weak overseas demand hurts exports, though critics warn that throwing more money into the economy won’t fix chronic woes plaguing Japan like low productivity and a rapidly shrinking labor force.
The slew of weak data came as global policymakers scramble to deal with market turbulence caused by Britain’s vote last week to leave the European Union, which threatens premier Shinzo Abe’s efforts to pull Japan out of decades of stagnation.
“Monetary and fiscal policies only buy time and what’s important is to pursue structural reform,” said Katsuya Okada, head of the main opposition Democratic Party. “Three and a half years were wasted as Abe delayed reforms,” he told reporters.
The Bank of Japan’s closely-watched quarterly tankan survey on Friday showed the headline index for big manufacturers’ sentiment stood at plus 6, unchanged from three months ago.
The survey’s big non-manufacturers’ sentiment index worsened to plus 19 from plus 22, while separate data showed household spending fell for the third straight month in May and core consumer prices suffered their biggest annual drop since 2013.
All of this kept the BoJ under pressure to expand stimulus as early as its rate review on July 28-29.
The central bank added negative interest rates in February to its stimulus program launched in 2013, under which it prints 80 trillion yen ($780 billion) a year to buy government bonds, but inflation has failed to make headway to its target.
“Worsening sentiment for non-manufacturers represents weak demand. This gives the government an incentive to increase stimulus spending,” said Daiju Aoki, an economist at UBS Securities.
The government is also seen increasing fiscal spending as weak overseas demand hurts exports, though critics warn that throwing more money into the economy won’t fix chronic woes plaguing Japan like low productivity and a rapidly shrinking labor force.
The slew of weak data came as global policymakers scramble to deal with market turbulence caused by Britain’s vote last week to leave the European Union, which threatens premier Shinzo Abe’s efforts to pull Japan out of decades of stagnation.
“Monetary and fiscal policies only buy time and what’s important is to pursue structural reform,” said Katsuya Okada, head of the main opposition Democratic Party. “Three and a half years were wasted as Abe delayed reforms,” he told reporters.
The Bank of Japan’s closely-watched quarterly tankan survey on Friday showed the headline index for big manufacturers’ sentiment stood at plus 6, unchanged from three months ago.
The survey’s big non-manufacturers’ sentiment index worsened to plus 19 from plus 22, while separate data showed household spending fell for the third straight month in May and core consumer prices suffered their biggest annual drop since 2013.
All of this kept the BoJ under pressure to expand stimulus as early as its rate review on July 28-29.
The central bank added negative interest rates in February to its stimulus program launched in 2013, under which it prints 80 trillion yen ($780 billion) a year to buy government bonds, but inflation has failed to make headway to its target.
“Worsening sentiment for non-manufacturers represents weak demand. This gives the government an incentive to increase stimulus spending,” said Daiju Aoki, an economist at UBS Securities.
