Abe misses again: BOJ sees output decline in Q2

Abenomics, Japan’s economic plan with three arrows in the quiver, may need another few arrows.

Japanese Prime Minister Shinzo Abe’s plan to boost growth and conclusively lift the world’s third largest economy out of a long deflation phase hit another road bump Monday. After three quarters of growth, the Bank of Japan sees weak Asian demand sending factory output lower during the second quarter. In the first quarter industrial production beat the market’s forecasts and advanced 1.5% over the previous quarter.

The central bank’s negative prediction for outlook was based on rising inventories at automakers and steelmakers seeing a drop in production due to a slowing of Asian demand.

“Industrial production will increase moderately reflecting domestic and overseas demand, albeit with some fluctuations,” the BOJ said in a monthly economic report released on Monday.

The three arrows of the Abenomics strategy are aggressive monetary easing, flexible fiscal policy and reforms that will increase Japan’s long-term economic growth. The additional arrow will probably be getting the business sector to increase investments in their companies, specifically capital expenditures.

Last year, Abe pressured business executives to raise worker wages for the first time in years. On Monday, Abe said he plans to meet with the business sector to encourage more capital expenditures. In particular, Japanese companies have an urgent need to buy more cutting-edge information technology.



Categories: Asia Unhedged, Japan

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