Japan Releases Cautiously Optimistic Data

Andamento del mercato - 30/08/2016

July was the month that Japan caught a glimpse at the light at the end of the tunnel with economic indications surpassing expectations and previous month’s values. Unemployment in July fell to a 2 decade low of 3.00% from 3.10% that constituted in a boost in consumer morale and spending, having both household spending and retail sales spark up over the mentioned time period. Being a long tunnel that Japan’s economy has to cross, on a yearly basis both statistics remained entrenched in negative territory as wages continue to grow at a dull pace and with the sales-tax rise in 2014, consumers continue to tread cautiously. Spending is reported to have declined for a 5th consecutive month on an annual basis and adding even further, a general slowdown in the global economy also has investment float at low levels keeping the country’s gross domestic product to zero values, meaning zero growth despite all efforts in both fiscal and monetary policy.

The Bank of Japan opted to cut rates into negative territory at the start of the year in an effort to halt its struggle to fight economic lethargy whereas at the same time fiscal policy is combating the caveats. The strong Yen is keeping back expansion especially by holding back corporate profits and pay raises where in turn leads to soft household spending. A basket of drawbacks pushed Japan’s economy into deflation keeping the bank’s inflation goal of 2.00% distant despite years of heavy money printing. In order to shore up the economy, Prime Minister Shinzo Abe postponed a second sales tax hike while also unveiled a new economic stimulus package of 28.10 trillion Yen in July having all eyes turn towards the central bank now. Following on the words of BoJ Governor Haruhiko Kuroda, where he echoed on his reiterations at the Jackson Hole Symposium, policymakers are well prepared to provide more stimulus stating that the bank has sufficient room to shift interest rates even deeper. Japan’s central bank is expected to announce a significant expansion in monetary policy as it concludes its next meeting on September 21st.

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