Japanese manufacturers’ received some good news this August. The country’s central bank has launched aggressive monetary policies to ease the economy. This is meant to boost the weaknesses in an economy already facing a decline in exports along with sluggish consumer expenditure.
The Reuters Tankan, which keeps track of Japan’s Central Bank’s quarterly Tankan, caught data that shows that exports tumbled the most (in July) since the past global financial crisis, and economic growth stalled as at April through June.
This underscores the challenge that Prime Minister Shinzo Abe has to deal with to boost growth as his structural reforms and fiscal spending (dubbed Abenomics), hasn’t lived up to expectations when it comes to pulling the country’s economy out of low growth and deflation.
Illustrating fragility instead of strength in consumer expenditure, the country’s service sector’s confidence fell for the first time in over five months. This was revealed by a poll of over 533 big and mid-sized agencies from August 1 to 16, of which more than 275 responded.
The strength of the yen, currently close to reaching a seven-week high of 100 yen to a dollar. JPY’s fall has hurt stock prices and hit exporters’ profits. The strength of the currency brings down the cost of importing and increases the risk of returning to deflation.
The Nikkei CPINow index, which is designed to capture the daily prices following the point-of-sales systems used at supermarkets, on Tuesday revealed the first annual decline in over a year.
Among the products that suffered big decline in price were chilled deserts, instant cup soups, sweetened buns, low-malt beer, tofu, and mushrooms.
This data piles up pressure on the Central Bank to do more by September (when it does a comprehensive review to determine the effects of the stimulus program).