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Japan Economic Outlook Quarterly Update: abenomics in 2017 restart (growth and inflation outlook)

Japan Economic Outlook Quarterly Update: abenomics in 2017 restart (growth and inflation outlook)

1 June 2017 | 2:11 am

wrap up – real GDP 2017 1.4 percent , is expected to exceed the potential growth rate seen with 0.8% over 3 consecutive years. – tightening of the labor supply and demand is to accelerate the increase in wages, it will be restored consumption. – stabilization of the global economic market and the depreciation of the yen is to stimulate business activities, there is also a need for labor-saving due to tight labor supply and demand, will capital investment to recover. – Although prices pick up slowly towards deflation completely break away, at up to about 1% in 2017 the end of the year, inflation goal of 2% Bank of Japan will become quite ahead. – There is no additional monetary easing, even in the global rise in interest rates, towards the inflation goals the Bank of Japan to patiently suppress the long-term interest rates to about 0%, will be a depreciation of the yen force. – turned to fiscal policy is relaxed, the company savings rate in the recovery in corporate activity has been re-reduced, resurrected the net demand for funds is the force money to circulate and expand, it indirectly of monetary policy to monetize effect becomes stronger, will the power of reflation becomes stronger. – the expansion of nominal GDP in excess of long-term interest rates is the greatest achievement of abenomics is, will continue to promote the power of reflation toward the deflation completely break away. – Abe Cabinet high support rate will become a driving force of structural reforms. – the budget deficit is shrinking as a trend, in the 2020 fiscal year would eliminate the deficit in the primary balance. Real GDP growth rate since 2017 is expected to slightly above the consensus · Sees stronger than consensus a decrease in the effect the unemployment rate of fiscal policy. Forecast of prices is a consensus par, it will be looking at stronger rise in real wages. From the second half of the year in 2018 prices is picking up, deflation completely break away it would be conscious again. The unemployment rate will become as similarity of from less than 3% and the late 1980s that domestic demand has expanded strongly is recognized gradually. Prolongation of the domestic demand pressure and monetary easing from the United States are also similar. · Early compared to the consensus, we expect the start of the increase in the target for the long-term interest rates by the Bank of Japan in 2018. But add additional monetary easing is not, even in the global interest rates rise, towards the inflation goals the Bank of Japan to patiently suppress the long-term interest rates to about 0%, will be a depreciation of the yen force. Wage increase becomes clear, from 2018 prices to rise above the 1%, it will go slowly raised the target for the long-term interest rates. Growth – is supported by the recovery of the effect and the corporate activities of fiscal policy And real GDP growth rate of 2017 and 1.4%, expected to exceed the potential growth rate seen with about 0.8 percent for the third consecutive year. From inclusive austerity consumption tax hike in 2014, it has been converted to financial relief, including the implementation of large-scale economic measures. Tight labor supply and demand is to accelerate the increase in wages, will to recover the consumption activities. Investment activities for the Tokyo Olympic Games in 2020 also starts to move, there is a possibility of exceeding the potential growth rate over a long period of time. And corporate activities would recover. Stabilization of the global economic market and the depreciation of the yen is to stimulate business activities, will expand capital investment. Employment shortage is beginning to aware of the need for productivity of the increase due to labor-saving investment in the company. Recovery of external demand and domestic demand are balanced, the growth contribution of net exports will have almost no state continues. Raising again consumption tax rate of the 2019 October remains as a risk of growth. Show improvement in the employment environment is the way to deflation completely break away Japan economy is strongly affected by the credit cycle than production and inventory cycle. Small and medium-sized enterprises lending attitude DI of Tankan, as the credit cycle, represents the trend of the service industry to lead the expansion of employment, are known to be clearly ahead of the unemployment rate. DI has continued to rise firmly, the unemployment rate continued to decline towards 2.5 percent, indicating that wage growth is stronger. The unemployment rate will become as similarity of from less than 3% and the late 1980s that domestic demand has expanded strongly is recognized gradually. – side effects of negative interest rate policy so far has not been large. The greater the side effects that the exhaustion of financial institutions to negative interest rate policy of the Bank of Japan, should this DI is deteriorated. If there are such things as DI is worse, it means that the road to deflation completely break away has been closed, the Bank of Japan will be forced to the conversion of the negative interest rate policy. Excessive financing part of, such as apartment loans using the environment of ultra-low interest rates begins to be a problem, monetary authorities began to watch. Corporate savings rate is re-reduced, movement is resumed to the deflation completely break away And corporate activities had weakened temporarily. Become a force to de-leverage and restructuring of the companies indicated by the abnormal positive corporate savings rate is to destroy the total demand, it has been the cause of the prolonged sluggish domestic demand and deflation. It has been steadily reduced by such abenomics, but by the destabilization and the austerity of the global economic market, had gotten the rebound. Global stabilization, improvement of production and inventory cycle, due to the yen’s depreciation, corporate activities are becoming re-activated. Because of the, productivity and profitability improvement, it recognized the need to direct the investment of the cash, would a company savings rate decreases towards 0%. Returning to a normal state of negative, excess savings will not destroy the total demand, the deflation completely break away. Net demand for funds is the force of the reflation of abenomics to revival · Abenomics will re-run as 2.0. Revival of corporate savings rate drop and relaxation net of capital demand due to the fiscal policy, as a force that money is circulated and expansion, was a reflation source of abenomics. It disappears in such austerity, abenomics 1.0 got to demise. Turning to fiscal policy is relaxed again, together with the recovery in corporate activity, capital demand of the net is revived, it will also become strongly that the effect of indirectly monetize to quantitative monetary easing. Form of abenomics that the yen depreciation, stock sales and rising prices will play. Funding needs of the net is the force that expenditure of the company and the government, leading to the expansion of the total wages in both the decrease in the unemployment rate. Is also a There is also a weaker yen of force in the expansion of the money. Still, demand for funds net is quite far from level to overheat the economy and prices. Interest rate increase after deflation is slow, the Bank of Japan will be able to correct the slow monetary easing. Prices – compared to inflation and expansion of total wages is weak situation will lead to an increase in real wages And prices had been stagnant. So far in addition to the yen due to destabilization of the decline and the global economic market of crude oil prices, weak demand after the consumption tax hike in 2014 it has become a cause. Some were seen also stimulate demand due to price cuts. However, in 2017, compared to inflation and expansion of total wages is weak situation leads to an increase in real wages, it can be expected to restore the demand. • The 2017 prices towards deflation completely break away will pick up slowly. In addition to the recovery of demand, crude oil prices also picked up, a weaker yen also seen as progress, consumer prices in 2017 the end of the year will rise to about 1 percent. Already it would be to realize that arrived until the situation is not in deflation is born. However, inflation is moderate, inflation goal of 2% of the Bank of Japan would be quite as in the previous 2021 years. It until the monetary policy of the Bank of Japan continues to be a relaxed feeling. Societe Generale Securities Co., Ltd. Research Department Takuji Aida [Recommended article of the editorial department] – annual income rises 2 million yen!? I ◯◯ type income you want to know because company employees? – 1 million yen at 790,000 yen lucrative? 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