BOJ strikes more upbeat view on economy

By Hiroshi Hiyama, AFP

TOKYO — The Bank of Japan (BOJ) on Friday struck a more upbeat view of the world’s number three economy, saying exports were showing signs of picking up while factory output has started to ��bottom out.�� The comments came as policymakers wrapped up a two-day meeting where they held off fresh easing measures, after announcing in late October a huge expansion of the BOJ’s asset-buying program. At a post-meeting press briefing, bank governor Haruhiko Kuroda repeated a pledge to do whatever is necessary to achieve the bank’s 2.0 percent inflation target in 2015, part of a wider bid to end the deflation that has plagued the economy for years. A plunge in crude oil prices is threatening the bank’s target, but cheaper energy should give the wider economy a shot in the arm and generate higher prices, he said. The oil price drop has also narrowed Japan’s gaping trade deficit while a sharply weaker yen has been a plus for exporters.

��The fall in oil prices has positive effects on the overall economy,�� Kuroda told reporters. The central bank kept up its view that Japan was seeing a moderate recovery, in line with other advanced economies including the United States. ��In this situation, exports have shown signs of picking up,�� the BOJ said earlier in the day. 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 on-month in October, beating market expectations. ��Business sentiment has generally stayed at a favorable level, although some cautiousness has been observed,�� it added. Highlighting that caution, the BOJ’s quarterly Tankan survey this week showed confidence among major Japanese manufacturers edged down in the three months to December. A separate bank report Thursday showed firms were holding a record amount of cash equivalent to almost half the country’s gross domestic product, despite calls for more wage hikes and capital spending. However, Tokyo’s efforts to stoke the economy, which initially bore fruit, took a hit after an April sales tax rise slammed the brakes on growth as Japan sank into recession during the third quarter.

The decline prompted Prime Minister Shinzo Abe to delay a second sales tax rise initially planned for next year and call snap elections that he easily won on Sunday. However, Fitch last week placed Japan’s sovereign credit on Rating Watch Negative, warning that delaying a second tax rise would jeopardize efforts to shrink one of the world’s heaviest public debt burdens. The move came after Moody’s downgraded Japan’s credit rating, citing ��rising uncertainty�� over the debt situation and Abe’s faltering efforts to kick-start the economy. The BOJ’s decision on Friday means it will keep trying to pump cash into the banking system at an annual pace of about 80 trillion yen (US$670 billion), a scheme designed to stimulate the wider economy.