Chief Cabinet Secretary Yoshihide Suga, Abe’s top spokesperson, said Monday that there had been a continued improvement in the employment and income situation and that the government expects the economy to recover gradually.
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The economy shrank 0.4 percent in the October-December quarter from the previous quarter.
That came even as central bank governor Haruhiko Kuroda has ratcheted up monetary easing in concert with government efforts to spur higher wages, consumer spending and investment. The yen weakened sharply, which boosted Japanese exporters’ profits and sparked a huge stock market rally that bolstered Abe’s claim that “Japan is back”. “(The plan) actually worked, but now it is moving in reverse”, said Takuji Okubo, director of Japan Macro Advisors in Tokyo.
“Policymakers are not really helping to make Japan robust enough so that the economy can actually sustain growth… They have basically failed and need to bear the blame”.
But analysts have suggested that against a backdrop of currency fluctuations, a global oil glut and falling prices, as well as turmoil in financial sectors in Europe as well as the USA, the outlook for the world’s largest economy is less than stellar, as “Abenomics” assumes demand for Japan’s exports, which lead the economy here, while a weak yen ensures the government’s margins stay favorable. But many observers disparaged the move as desperate, while the yen soared on the back of fears about a slowdown in the global economy, marking a serious threat to Japan Inc’s bottom line.
Tokyo will be watching labour talks this spring closely for signs that firms are ready to put more cash into employees’ pockets, which would offer hope for a pick-up in consumer spending.
TOKYO – Japan’s economy contracted in the last quarter of 2015, official data showed on Monday, dealing another blow to Prime Minister Shinzo Abe’s faltering bid to kick-start the world’s number-three economy.
Market speculation of additional monetary easing simmers, although the Bank of Japan’s policy ammunition appears to be dwindling, analysts say, after it deployed negative interest rates last month.
The shock transfer was aimed toward penalising banks for storing extra reserves on the BoJ slightly than making loans which might increase progress. “Businesses have already begun cutting profit forecasts, a trend that could continue as the yen strengthens”, Harris warned.
As his growth programme wobbles and the Bank of Japan struggles to hit an ambitious two-per cent inflation target, the prime minister must decide whether to follow through with another sales tax hike next year.
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Consumer demand fell more than expected in the last quarter, dipping to a four-year low, offsetting moderate growth in business investment, said Marcel Thieliant of Capital Economics.
