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Inflation strategy on pace: Kuroda

Economy in moderate recovery: BOJ

Kyodo, JIJI

The Bank of Japan on Thursday upgraded its opinion of the economy for the seventh consecutive month and said it is “starting to recover moderately” on improving corporate sentiment and solid consumer spending.

It was the first time the BOJ has used the word “recovery” in its assessment in 2½ years. The last time was in January 2011, two months before the Great East Japan Earthquake.

BOJ Gov. Haruhiko Kuroda said the central bank came to its conclusion from various economic indicators and noted “a positive cyclical mechanism has been gradually working.”

At a two-day policy meeting through Thursday, the BOJ retained its target of achieving around 2 percent inflation within two years to halt nearly two decades of deflation by pumping record amounts of cash into the economy.

“The BOJ has taken enough policy measures for achieving the target in about two years,” Kuroda said.

After the meeting, the nine-member Policy Board unanimously agreed to maintain the radical monetary easing policy it launched in April. The goal of the program is to double the nation’s monetary base by boosting purchases of a wide range of government bonds and risky assets.

In an interim review of the BOJ’s semiannual outlook issued in late April, Japan’s projected economic growth for the year ending next March was revised downward from 2.9 percent to 2.8 percent.

As for the outlook on prices, the BOJ stuck to its view that the consumer price index will post a year-on-year rise of 1.9 percent in fiscal 2015.

The bank’s median forecast for the CPI, excluding fresh food, came to a 0.6 percent uptick this year and 1.3 percent in fiscal 2014, respectively down from the 0.7 percent and 1.4 percent growths projected in April. The fiscal 2014 and 2015 forecasts, however, exclude the effects of the two planned sales tax hikes.

The economic forecast for fiscal 2014 was trimmed to 1.3 percent and that of 2015 to 1.5 percent, compared with 1.4 percent and 1.6 percent, respectively, projected in April.

Overall, the country’s growth rate and CPI change “will likely be broadly in line” with the April forecasts, the central bank said.

The upgrade came after the bank’s quarterly “tankan” sentiment survey showed that business confidence among large manufacturers re-entered positive territory in June for the first time in seven quarters, boosted by a recovery in exports driven by the weakening yen and improving U.S. economy.

Sales at department stores are also on the rise, with rising stock prices stirring hopes of an economic recovery.

In its statement Thursday, the BOJ said exports have been “picking up” while capital investment “has stopped weakening and shown some signs of picking up as corporate profits have improved.”

  • http://getironic.blogspot.com/ getironic

    No, it’s not.

    The currency was inflated by Abe. So, stock prices rose because it takes more currency to represent the value of those businesses. So on paper, there’s “growth”.

    But there has been no substantial increase in production to match that inflation. So all that is being done is the devaluing of the yen. Which really means the theft of people’s savings.

    So yes, some people are spending more because they fear inflation stealing yet more of their wealth. How does stealing that wealth bring more money into the economy anyway? It just moves some remnants around with a net loss, since there’s not greater production anyway.

    If everyone was spending their savings like Abe wants them to, against what could the government leverage its massive debt? With no savings the interest rates would go up — meaning interest rates on Japan’s debt, and that would spell terminal failure for the economy, not recovery.

    A “recovery” implies knowledge of that which one is recovering from, but government after government is living in evasion of what the economy is in need to recover from: decades of crippling socialist regulatory and redistributive policies. Observe that the debate is always about tinkering with the economy, and never about shrinking the massive debt and costs of running the government, which is going to bankrupt the country within our lifetime. The current so-called conservative government, thinks the solution is more of the same tinkering, and never questioning the effect of having its hands in the cookie jar (basically all cookie jars).

    The reality is that all any government can do to create jobs and production, is to not destroy them in the first place by getting in the way.