Abe sent a “powerful message” by announcing the 28 trillion yen ($267 billion) stimulus package on Wednesday, Economy Minister Nobuteru Ishihara was quoted as saying by Japanese media hours after the announcement.
Advertisement
The government has previously said it plans to boost spending on high growth sectors including infrastructure building, farm exports as well as tourism, which has been booming of late owing to the increasing purchasing power of visitors coming here when the yen declines.
Global shares mostly rallied on Wednesday (Jul 27) after Tokyo launched a massive stimulus package, with sentiment also cheered by accelerating economic growth in Britain and upbeat company results.
The prospect of more stimulus in Japan has overshadowed the Fed meeting this week.
Analysts cited the Japanese stimulus as supportive of European markets. But it makes exporters less competitive overseas and takes a bite out of their bottom line.
Investors sold a net of ¥271.5 billion worth of stocks in the same week following a net purchase of ¥444.6 billion previously.
Company earnings have been better than expected on the whole and currency doesn’t seem to be playing as much of a role as it had in previous quarters, said Rahul Shah, chief executive of Ideal Asset Management in NY.
Some have argued that the government does not have the means to support the additional spending.
Reports said Abe will propose improved wages for childcare and elder care workers, introduction of needs-based scholarships for college students and reduced employment time required to earn pensions.
“Abe pledged to “rev up the Abenomics engine to the maximum” but this stimulus won’t be enough for that”, Osanai said.
Analysts warned the Nikkei, which rose 1.7 percent, could retreat if monetary stimulus measures released at Friday’s Bank of Japan meeting disappoint. The central bank has been on the sidelines ever since, watching the economy plunge deeper into deflation.
Cutting interest rates into negative territory has proved unpopular with the public and the government, so deepening those cuts is a less likely option, sources familiar with central bank thinking say.
A security officer is seen through a chain link as he stands guard outside the Bank of Japan headquarters in Tokyo, Japan, March 31, 2016. “However, this week’s FOMC meeting is facing heightened importance due to the uptick in US economic data”. Abe’s government has delayed a consumption tax increase after an earlier rise pushed the country into a brief recession.
Aluminium at $1,592 was unchanged – the metal is being pressured lower by stock increases in LME-registered warehouses in Asia and talk of more to come. Japan dodged a recession in the first three months of the year.
Advertisement
The Bank of Japan’s most recent Tankan survey showed confidence among small firms and non-manufacturers worsened during the second quarter.
