The Bank of Japan’s Monthly Economic Report

January 24, 2013 in Japan

The Bank of Japan released its Monthly Economic Report on January 23, 2013.

The Bank conveyed its opinion of the current situation of the Japanese economy in mixed terms, though the tone of the report was definitely more optimistic compared to earlier publications.

The Current Situation

The bank pointed out that the rate of deceleration in the country’s exports has started slowing, while industrial production has shown signs of bottoming out.

There is continuing weakness in capital investment in the corporate sector, including a pressure on profitability that is notable among manufacturing businesses, said the report. The business sector continues to be cautious on the near term economic outlook, but signs of confidence can be seen to be emerging in some sectors. This may be due to the fall in the yen and a rise in the stock market.

Employment continues to be a matter of serious concern, more so since a recent improvement seems to be tapering off. Private consumption is showing signs of emerging strength, as indicated by rising auto sales during the recent months.

On a heartening note, public investment has shown a rising trend and there is a pick-up in the housing market.

The report was worried about price trends which continue to signal that the Japanese economy is struggling through a mild deflation.

Policy Action

The Japanese Government intends to:

  • Complete the reconstruction efforts after the earthquake and tsunami disasters
  • Direct the economy into a virtuous cycle of growth and wealth creation, and
  • Regain for Japan its status as a strong economy.

The path to these objectives would need:

  • Correction of an undue appreciation in the value of the yen
  • Overcoming deflation through prompt and flexible management of economic and fiscal policy
  • Policy co-ordination between the Government and the Bank of Japan to overcome deflation and spur sustainable economic growth
  • Fixing the price stability (inflation) target at 2% as decided in the meeting with the Bank on January 22, 2013
  • The introduction of an “open-ended asset purchase” program to achieve aggressive monetary easing.




Comments are closed.