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BOJ strikes more upbeat view on economy, holds off fresh measures

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A plunge in crude oil prices is threatening the bank’s target, but cheaper energy should give the wider economy a shot in the arm and generate higher prices, he said.

Yep, nothing like higher prices to get people to go out and consume...

I mean really, WTF? Is there another Japan somewhere else that I am not aware of? A Japan in which vast accumulation of public debt and rising prices leads to prosperity? Is the Japan I am living in an alternate reality? Or are our politcians living in a alternate reality?

Are people really this nutty? Does 2+2 now equal 5?

2 ( +8 / -6 )

Average winter bonus for this year was 840,000 yen, highest since the bubble era. We should see wage hikes in the area of 2 to 3 % next spring. I will have to wait until the next quarter's results are in, but I am cautiously optimistic.

-1 ( +5 / -6 )

Links kickboard ?

0 ( +3 / -3 )

There is a difference in seeking 2% inflation through measure that create real demand, such as investment in the fast growing alternative energy sector and deregulation of the energy industry, and just printing money. When the government is too beholden to powerful economic interest groups it can't help spur innovation, all that's left is the latter measure, which is a boon to the investor class but impoverishes most of us.

3 ( +3 / -0 )

It's that elusive feel good factor that is missing... Got to raise the expectations for that forgotten 40%, cpi gives some indication in areas that need addressing, the downward trend in oil prices is not being reflected in energy bills at a fast enough rate. J population will be belt tightening as the winter cold weather takes a grip, never realised how cold it gets, I thought UK was chilly but the 'brass monkey is crying his eyes out'.

http://www.stat.go.jp/english/data/cpi/1581.htm

-2 ( +1 / -3 )

Funny reading about private consumption remaining " resilient" when a previous article in JT business section talks about car manufacturers sounding alarm over the continuing slump I their domestic sales. Kuroda had been singing about recovery and resilient spending for 2 years but most of the recent data don't seem to support it. I get that it is his job to keep talking it up in hope of self fulfilling prophecy but the contradiction between the BOj assessments and reality on the ground is obvious. Still Christmas present buying season should provide a little bit of tailwind for consumer spending, but I think it will probably be softer than expected.

1 ( +2 / -1 )

Average winter bonus for this year was 840,000 yen,

Really? Who do you know who got a larger bonus this year? My Japanese friends got a kick out of this one, all were expecting a better bonus this, but not a single of one of them did, not even one. I wonder who it was who got more?

It's that elusive feel good factor that is missing... Got to raise the expectations for that forgotten 40%, cpi gives some indication in areas that need addressing, the downward trend in oil prices is not being reflected in energy bills at a fast enough rate. J population will be belt tightening as the winter cold weather takes a grip, never realised how cold it gets, I thought UK was chilly but the 'brass monkey is crying his eyes out'.

Remember how much cheaper imports became when the yen strengthened back in 2010-2012? Oh wait, imports didn't become cheaper at all, the companies pocketed all the extra money they made in exchange savings, and didn't pass any of it on to consumers, saying that doing so might cause "harmful fluctuations to consumer prices". A new BMW cost as much in 2012 as it did in 2006, despite it's import cost being 40% lower. I don't expect to see companies reducing retail energy and gasoline costs by much, they will pocket as much as they can. Non-compeitive business practices are part of the culture here.

4 ( +9 / -5 )

Hi sangetsu03, It will be an uphill struggle to change habits of a lifetime for consumers that are natural savers. Family business has passed on genuinely what's affordable to staff, that are so conscientious and loyal. I am afraid corporate Japan attitude to consumers reflects corporate UK in many respects. I sometimes naively question the philosophy with work colleagues who question my politics. I suspect BOJ Gov Haruhiko Kuroda struggled to secure enough support for a further round of stimulus. I don't spend nearly enough time in Japan to make a reliably informed judgement on incomes/spending, family are understandably reluctant to let me take my calculator to family budgets, especially grand parents.

1 ( +4 / -3 )

A plunge in crude oil prices is threatening the bank’s target, but cheaper energy should give the wider economy a shot in the arm and generate higher prices, he said.

sangetsu, What part of this Kuroda-san's comment don't you understand? This would be a translation from Japanese to English. And BOJ governor shouldn't be too specific. I think he is right,

A plunge in crude oil prices will cause uncertainty in economy, and could threaten the bank's target, but Cheaper energy will stimulate consumption and demand, and generate higher prices.

Who do you know who got a larger bonus this year?

I know many.

-3 ( +5 / -8 )

Hi tinawatanabe there are many facets of the economy that mirror financial decisions needed to be addressed in Europe, notably Kuroda-san and European Central Bank governor Mario Draghi difficulties in juggling the financials with the politically sensitive structural reforms. To ask the 60% to relinquish some of there employment security to the 40% is a huge leap of faith, politically suicidal for any party who wishes to remain in office.

0 ( +2 / -2 )

while factory output has started to “bottom out”.

Wow, that is great double-speak, even by Japanese bureucrat standards. He conveniently did not say when it will actually bottom-out.

0 ( +4 / -4 )

jesrseyboy, Japan's industrial output index is up in November two month in a row. So, December is expected up too.

itsonlyrocknroll, Kuroda san is BOJ governor, so should stay away from politics. I don't support the employment situation now where the gaps are widening. I'm only telling sangetsu03 that the economy is not as bad, and Kuroda san is not as nutty, as he tries to depict.

-6 ( +3 / -9 )

I know many.

I polled 6 Japanese friends at lunch today about their bonuses, all of them work in the financial industry. None of them got a larger bonus this year.

I'm only telling sangetsu03 that the economy is not as bad, and Kuroda san is not as nutty, as he tries to depict.

Japan is in recession at this very moment, isn't it? That's not good, is it? And the recession was caused by reduced consumption, meaning that they bought less than they did last year. Kuroda says he hopes to see prices go up. When prices go up, do people buy more? Or do they buy less?

Fuel prices have decreased, but how much of this decrease will be passed on to consumers? Let's see if electricity bills fall, and if gasoline prices at the pump fall. If these savings are not passed on to the consumer, then Kuroda's formula for increasing prices will not work as he intends. Prices will go up, because the yen will continue to fall. But increasing prices will not result in inflation as people compensate for increasing prices by buying less. This reduces sales, profits, and tax revenue.

Japan does not need inflation, Japan needs growth. Inflation does not cause growth, growth causes inflation. This is fundamental economics. Simply decreasing the value of currency is not inflation, it is devaluation. We already know that Japanese react to devaluation by saving more to compensate for the drop in value in their savings. The people are saving because they have little confidence in the economy, or the security of their pensions. Kuroda is going to get (is getting) the exact opposite result to that which he wants, and if he can't see that, then he is indeed nutty.

6 ( +11 / -5 )

sangetsu

None of them got a larger bonus this year.

National public servants, lawmakers, and many private companies people got larger bonuses.

Japan is in recession at this very moment, isn't it?

"exports were showing signs of picking up while factory output has started to "bottom out".

When prices go up, do people buy more?

Two percent target in 2 years was hard to achieve to begin with. When prices (core cpi) go up, it means you assume demands are up.

Fuel prices have decreased, but how much of this decrease will be passed on to consumers?

At least, it will stop increasing prices.

Japan does not need inflation, Japan needs growth. Inflation does not cause growth, growth causes inflation. This is fundamental economics.

I think Kuroda san knows the fundamental economics.

Simply decreasing the value of currency is not inflation, it is devaluation.

He is not decreasing the value of currency, it is only a result. Japan is trying hard to turn the economy back on track.

The people are saving because they have little confidence in the economy, or the security of their pensions.

I think that's exactly what Kuroda and Abe are working on it. People are begining to see confidence.

-7 ( +4 / -11 )

Cheaper oil makes products cheaper to produce, thus could be sold cheaper, so so much here is bull dinky.

If one hopes to inflate at 2% and salaries do not meet it, puls a 3% increase in costs of all goods...something is very wrong.

Oh, and by the way, I connected with 437 people employed at my place of business. Not one got a bigger bonus, and not one knows of anyone outside that did. All are saving their meager bonuses for a rainy day.

3 ( +6 / -3 )

I think that's exactly what Kuroda and Abe are working on it. People are begining to see confidence.

Once again you show you're living in a bubble. Almost no one has any confidence.

2 ( +6 / -4 )

Almost no one has any confidence.

I said "begining to see", not "have". High school newly grads are seeing higher employment. There are many other sighs that show improvements. Maybe it takes time for some to feel, but at least many here said making money from exchange rate, exporters and investors are making money, etc.

-4 ( +3 / -7 )

I polled 6 Japanese friends at lunch today about their bonuses, all of them work in the financial industry. None of them got a larger bonus this year.

The poll conducted with more than 150 companies (kickboard's link) disagrees with your "poll" of 6 friends. I wonder which carries more weight.

0 ( +3 / -3 )

sangetsu

The people are saving because they have little confidence in the economy,

Japanese have always been big savers, they are traditionally the best savers in the world, not because they don't have confidence in the economy.

There are a lot of people beginning to see improvements, and many are benefiting , Tina has already pointed out some who got increased bonuses, just because your 6 friends didn't doesn't mean others didn't.

If things continue the recession will be short lived.

Exports are going well and should improve even more in the new year, December figures will be better than the previous months.

-3 ( +3 / -6 )

I said "begining to see", not "have".

They aren't even 'beginning to see'. Maybe some of the upper class (the depreciating yen has been great for me), but the average joe is still hurting bad.

2 ( +6 / -4 )

National public servants, lawmakers, and many private companies people got larger bonuses.

You do understand that public servants and lawmakers are government employees? That government employees do not contribute to the GNP? Those bonuses are from tax dollars, i.e. money removed from the productive part of the economy. Tax collectors paying more money to themselves is not a sign of an improving economy.

Kuroda is not stupid. He has to give these bogus pep talks. No voters want to hear that their pensions, nice civic centers and great health care all cost well beyond anything the country can pay. The government needs the yen to crash and burn. That's the only way they can pay their yen-based debt to the people of Japan.

It's economics 101. Japan is going to crash hard, and there is no way around it. These are just delaying tactics to make sure that the wealthy and connected can shore up their wealth before the crash. The rest of us are pawns. Keep the little people optimistic so they can soak a little more cash out of the system before the whole thing comes crashing down.

The only good that might come out of the crash will be if the Japanese get angry enough to clean out the corruption in government and their big money cronies. Japan could thrive if these characters were out of the way.

If you have a family and savings, you should not have too much of that in yen. Unless you can weather a 90% loss.

1 ( +4 / -3 )

commanteer have you got the date of this supposed crash please, is it this year, next year, the year after next or sometime off in the next century ?

Been hearing of this impending crash of over 25 years but yet still waiting.

0 ( +2 / -2 )

Floundering in a sea of untrueth, splash enough and the truth is covered, splash, splash, splash. Everything is fine splash, things are great, splash, data not so good splash, look the exports are up 00.1 yahoooooooooo, Local spending is down splash spash, splash.

-1 ( +1 / -2 )

tinawatanabe, I am a lowly quant analyst , asking humbly but directly what qualifies your opinion. It is a simple innocuous question. Sorry if it puts you on the spot, JT mods can decide if I have overstepped the mark.

0 ( +1 / -1 )

I wish I could share Kuroda’s rosy view on Japan’s economy, but I can’t see his resonates logical given the fact that major world economies are shrinking at this point with an exception of the US. . For people who don’t know, Japan’s auto industry which is major pillar of Japan’ economy ia being battered by the airbag recall and free-fall of ruble which has caused Nissan to stop taking orders in Russia.

So far, y BOJ's measures have NOT generated lasting economy affects based on the track records of Kuroda. One even can argue that Kuroda's performance is mediacore at the best.

0 ( +1 / -1 )

"Japan needs growth"

No it doesnt. Growth is an aggregate measure, while Japan's population shrinking. Even if GDP were zero, Japan's living standards would rise.

1 ( +2 / -1 )

Been hearing of this impending crash of over 25 years but yet still waiting.

In less than 2 years, the yen has lost almost 50% of its value. Many would say the crash is already here. The full effect of it will take some time to be felt, as it is currently being partly hidden by government spending.

The good news is that economies often quickly rebound from a crash, like a tree after pruning, if the government doesn't interfere. The bad news is that Japan's government will continue to interfere. When things get really bad, some populist group will come in promising to get money from the rich and give to the poor/working class. They will instead take from the rich and give to themselves.

This is basic history, repeated again and again. People always forget. It's like major earthquakes. People who warn of them are ignored, or even laughed at, if the earthquakes don't arrive on schedule. Then it happens, nobody is prepared, they promise to take action for the next time, and eventually forget about it again.

A crash isn't the end of the world. It's horrible, many people have a very hard time for a couple years, many wealthy investors lose everything (this is the part they are trying to avoid), those who still have money make a bundle buying up stuff on the cheap, the economy resets and grows again. There's really no getting around it, and it will be a dangerous time politically.

1 ( +2 / -1 )

tinawatanabe, No worries, my curiosity got the better of me,I sensed your opinions brace a political ideology commonly associated to party activism, this mindset can frustrate informed debate.

BOJ Governor Kuroda crucial decisions into steadying and guiding the 3rd largest economy is hobbled by political interference. Evidence of this interference is present in BOJ Governor Kuroda reluctance to publicly call for structural reforms necessary to increase growth in the wider private and public sector institutions and Industries. SME, similar to family business, are struggling to secure short term investment capital to expand and grow. Outside the professions, short term employment contracts are the norm, and cases of employees in similar posts with wage disparities of 30/40% are common place.

BOJ Governor Kuroda independence is necessary to increasing pressure on government to make these reforms.

The BOJ is financing public debt, a self perpetuating cycle of quantifiable risk increasing CPI, depressing consumer spending. However, J economy has breathing space as unemployment is low and benefiting from the cheap imported oil.

1 ( +2 / -1 )

"if the government doesn't interfere."

Crashes in the past were caused by the private sector, not the govt. 2008: unregulated subprime institutions plus Wall street. Japan 1991: the banks and real estate brokers.

The government is then handed the unenvied job of fixing the mess the greedy billionaires created for us, while the greedy billionaires get richer and we get poorer.

1 ( +2 / -1 )

The BOJ’s decision on Friday means it will keep trying to pump cash into the banking system at an annual pace of about 80 trillion yen ($670 billion), a scheme designed to stimulate the wider economy.

The best way to stimulate the economy would be to cut taxes on income, and profits. Nothing the BOJ does gives consumers to spend more money, nor does it result in higher take home pay.

Inflation comes from increased demand for goods and services. People and businesses with more disposable cash can do much more to get inflation up than those that are heavily taxed.

1 ( +1 / -0 )

BOJ Governor Kuroda reluctance to publicly call for structural reforms necessary to increase growth in the wider private and public sector institutions and Industries.

itsonlyrock, It is not BOJ Governor's job to publicly call for structural reforms. Have you ever seen any central bank do that in the world?

2 ( +3 / -1 )

Tina W, Very difficult to make comparisons, Mark Carney the current Governor of the Bank of England has a number of 'rolls' encompassing financial stability, supervision and monetary policy. Mark C is also Chair of the Monetary Policy Committee, Financial Policy Committee and the Board of the Prudential Regulation Authority. In these rolls he will quite naturally guide the government through many different aspects of the economy. If areas need particular focus say for instance the housing market he will bring that to the attention of Chancellor Osborne at committee stage and publish publicly accordingly.

Structural reforms are part and parcel of change for any economy, BOJ Governor Kuroda roll must be able to 'reach' into the J-economy and guide/encourage the relevant Ministries and political portfolio holders to make these market reforms. Transparency is the key to secure the electorates confidence. J- ministries publish rigorously prepared stats, developing and supporting a wealth of data. When BOJ Governor Kuroda publicly makes a statement it not to embarrass the government its to maintain confidence in the market. Abe san has a mandate to deliver the structural reforms that are the final ingredients tof Abenomics. The time is now.

0 ( +1 / -1 )

BOJ Governor Kuroda roll must be able to 'reach' into the J-economy and guide/encourage the relevant Ministries and political portfolio holders to make these market reforms.

I'd say it's a coup d'etat.

0 ( +1 / -1 )

A very contemporary Japanese coup d'etat, bloodless and by concensus for the good of the community.

Abe san needs total commitment and support from his BOJ Governor and central bank, you have rightly stated it is not the function of a central bank to interfere politically with the democratic process of government. How BOJ Governor Kuroda and the central bank would assist is briefing economic realities aimed publicly and firmily at the legion of vested interests resisting and creating inertia to the process of reform.

I have my own money invested in small/medium sized technology and financial software companies in Japan. I don't concern myself with the day to day management of these business. These businesses have orders waiting to be filled, but cannot raise capital due to the way banks manage there risk policy. Another factor is 70's style legacy employment practices. Employees on the social contract resist change, refuse to adapt to training or be flexible. They are Lacking the ability or skill to perform effectively, but are impossible to sack. These businesses need to reward the best whilst retraining and improving the skills of the employee that need coaxing. Abe san 3rd arrow can make this happen. But it is not going to be a walk in the park because 'salaryman' votes and is resistant to change. BOJ Governor and central bank can influence the economic climatic to bring about changes necessary to marginalise these groups.

-1 ( +0 / -1 )

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