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12 Dec 2014
Japan: Same old policies? - Rabobank
FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank explained that the return of recessionary conditions in Japan may suggest that PM Abe’s three arrow approach to revitalising the Japanese economy has stalled...
Key Quotes:
"...but at least his plan to secure a second term via an early election appears to be on course".
“Opinions polls suggest that Abe is on course to maintain or potentially expand his two-thirds majority in the lower house after Sunday’s general election and this should imply that Abe will stick with his commitments to brighten Japan’s future prospects with fiscal policy, easy monetary conditions and structural reform”.
“The combination of fiscal easing at the start of Abe’s first term in 2012 in addition to the aggressive step up in monetary policy stimulus were the first two of Abe’s economic arrows”.
“These have been instrumental in lifting the Nikkei 225 and pushing the yen lower”.
“Abe, however, has not scored so much success with structural reform and his critics remain sceptical of his ability to push through with this third arrow during a second term of government”.
“For long-term investors the very slow pace of deregulation and reform is a huge disappointment; Japan could be faced with many more years of inadequate growth as a result”.
“For now, however, press reports are suggesting that Abe has shifted the focus to the need to lift growth in the short term, after the 3% consumption tax hike in April hit the economy hard”.
“Press reports suggest that policymakers are considering shopping vouchers for lower income families as a way to stimulate demand and inflation”.
Key Quotes:
"...but at least his plan to secure a second term via an early election appears to be on course".
“Opinions polls suggest that Abe is on course to maintain or potentially expand his two-thirds majority in the lower house after Sunday’s general election and this should imply that Abe will stick with his commitments to brighten Japan’s future prospects with fiscal policy, easy monetary conditions and structural reform”.
“The combination of fiscal easing at the start of Abe’s first term in 2012 in addition to the aggressive step up in monetary policy stimulus were the first two of Abe’s economic arrows”.
“These have been instrumental in lifting the Nikkei 225 and pushing the yen lower”.
“Abe, however, has not scored so much success with structural reform and his critics remain sceptical of his ability to push through with this third arrow during a second term of government”.
“For long-term investors the very slow pace of deregulation and reform is a huge disappointment; Japan could be faced with many more years of inadequate growth as a result”.
“For now, however, press reports are suggesting that Abe has shifted the focus to the need to lift growth in the short term, after the 3% consumption tax hike in April hit the economy hard”.
“Press reports suggest that policymakers are considering shopping vouchers for lower income families as a way to stimulate demand and inflation”.