Top economists remained divided Monday over whether Prime Minister Shinzo Abe’s “Abenomics” policies will bear fruit but all saw eye-to-eye on the need for deregulation and new growth strategies.
“You can only buy so much time with monetary policies,” Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co., told reporters during a speech at the Foreign Correspondents’ Club of Japan in Tokyo.
“Abe needs to take bold steps on structural reform,” Kodama said, including introducing corporate tax cuts and major deregulation in the agricultural, medical, educational and other industries.
Jesper Koll, director of Japan equity research at J.P. Morgan, said at the FCCJ that Japan’s participation in the Trans-Pacific Partnership trade liberalization push “is absolutely key” and negotiations that will take place in the coming months will be crucial.
Abe’s measures to end decades of deflation induced the key Nikkei 225 stock average to spike and the yen to ease against other currencies, that is until recently, when financial markets turned volatile.
But Masayuki Kichikawa, chief economist at Bank of America Merrill Lynch, said the economic outlook isn’t bad and Japan could achieve 1 percent inflation by next year. That would fall shy of the Bank of Japan’s 2 percent target but would nonetheless be “a great achievement,” considering the years of deflation, he said, also addressing the FCCJ.
It will be important for Abe to take the initiative in cutting corporate taxes and promoting energy policies after the July Upper House election, Kichikawa added.
J.P. Morgan’s Koll was also optimistic, pointing out that consumer spending pushed Japan’s GDP to grow at an annualized pace of 4.1 percent in the first quarter this year. If Abe can remain in office for a few years, this will serve as “a promise of policy consistency,” which had been impossible with the revolving door of prime ministers over the last decade, he added. Between Abe’s first short-lived prime ministership, from 2006 to 2007, and his return last December, Japan has seen five other prime ministers.
Meanwhile Meiji Yasuda’s Kodama was pessimistic, saying that if the government fails to bring a definite halt to deflation, the market could retreat quickly.
The “period of adjustment could last longer” and volatility could continue to impact the market, he warned.
Kuroda’s Tohoku vow
ISHINOMAKI, Miyagi Pref.
Bank of Japan Gov. Haruhiko Kuroda expressed the BOJ’s readiness Sunday to support reconstruction of the disaster-hit Tohoku region through its low-interest loans to banks.
“We hope to back up reconstruction financially,” Kuroda told reporters after visiting a seafood-processing facility in Ishinomaki, a Miyagi Prefecture port city that was devastated in the March 2011 earthquake and tsunami. “Ishinomaki is making steady progress toward reconstruction,” he said.
Kuroda paid a visit to a disaster area for the first time since taking the helm of the central bank in March.
At the processing facility of Taiko Corp., which restarted operating in April, Kuroda took a firsthand look at fish-sorting machines and a freezer warehouse.