BOJ’s bold monetary easing a great success, economist says


The Bank of Japan’s bold monetary easing steps under Prime Minister Shinzo Abe’s reflationary economic policy package, dubbed “Abenomics,” have brought about great success, according to Yuji Shimanaka, head of the business cycle research body for Mitsubishi UFJ Morgan Stanley Securities Co.

“The subsequent weakening of the yen has helped double Japanese stock prices. (The easing steps) also proved effective in improving pension investment performances and made contributions in terms of tax revenue,” Shimanaka said in a recent interview.

He said the yen’s depreciation has provided benefits to Japanese business, having a major impact on corporate earnings and leading to a recovery of exports.

“Some electronics companies, which had been at risk of obsolescence due to deflation and the yen’s appreciation, are now showing signs of revival,” he added.

Shimanaka pointed out that when the yen weakened rapidly in the past, Japanese companies saw the ratio of products manufactured overseas fall two years later.

“This time also, we can expect Japanese firms to bring production back to Japan or to stop short of transferring plants overseas,” he said.

On the other hand, real wages have been on the decline and consumers are feeling disadvantaged, he acknowledged.

“Although this is not because of Abenomics, but because of the consumption tax hike (to 8 percent from 5 percent in April), the government should work out measures for assisting household budgets.”

He also stressed the need for the Abe administration to come up with measures to help small businesses overcome the difficulty they now face in raising prices to pass on the first stage of the tax hike to customers.

Regarding Abe’s decision to postpone the second stage of the consumption tax hike to 10 percent, Shimanaka said he was assuming the economy would be able to get through the additional hike even if it were implemented in October 2015 as originally planned, with the backing of the BOJ’s radical monetary easing and the government’s fiscal stimulus.

“Now that the tax hike has been postponed, companies should think they have been given a grace period, sit down and carry out capital spending,” he said.

Citing a policy priority for the administration, Shimanaka said Japan should step up efforts to become a tourism-oriented country.

Noting that the number of tourists from abroad is rising thanks to the yen’s depreciation, he said regional economies should explore ways to live in harmony with the weaker yen and attract visitors by inviting low-cost air carriers, increasing duty-free shops and advertising locally produced specialty goods.

“Tourism can revive regional economies,” he said.