The Bank of Japan conducts a quarterly
business confidence poll called the “Tankan Survey” which sheds light on the
status of the Japanese economy. The Bank declared recently that this is the
first time in almost two years that the Tankan Survey has exhibited some
positive signs.
The big manufacturers' index also
registered a sharp growth between April and June and ascended to plus 4. This
is a big change from the previous quarter when it was minus 8. These are
positive signs that are reaffirming the faith of businessmen in the Japanese
economy.
According to the survey, the large Japanese
manufacturers are now doing their bit to boost the economy. If the reports are
to be believed, large Japanese manufacturers are planning to expand their
capital spending in the present financial year and pump money into the system.
Financial analysts believe that this will most likely impact the economy in a
positive way.
The Japanese government has also been
making visible efforts to stimulate the economy. They have adopted an
aggressive monetary policy to boost the economy. The government has recently
released a fiscal stimulus to push Japan's stagnant economy. Market analysts
and observers who have been keeping their eyes fixed on the Japanese economy
say that the Prime Minister Shinzo Abe's 'Abenomics' is finally beginning to
show some concrete results. However, it is too soon to draw firm conclusions.
James Summer, Global Co-Chief Operating
Officer of Equities with Tokyo’s Acom Alliance, says," The Tankan survey
affirms the fact the business sentiments are turning positive in Japan. The
decline in the value of Yen and a steady economic recovery has won over the
faith of Japanese manufacturers. They look unaffected by the more recent market
turbulence and are willing to invest in the economy."
He further added," Japan is also
showing more positive signs. The industrial output has gone up. Even if only
mediocre, the net exports are also showing growth. With the imminent tax hike,
people will buy and hoard things which will lead to an increase in public
consumption. And alongside all of this, public works are expected to grow as
well. These economic signs combined with the positive results that the
'Abenomics' has yielded, has reaffirmed the faith of Japanese firms in their
economy.
If Japanese businesses increase their investments, the Japanese
economy will come back on the right track sooner rather than later."
Yen has been supportive
Among the various measures that the
Japanese government took to pull the economy out of deflation, one was doubling
the inflation target. The Central Bank of Japan aims to achieve 2% inflation.
This may seem a little too ambitious, but given the present scenario, it is
certainly the right step to take.
The economic crisis in Japan has prevailed
for over two decades now In fact, the country was struggling badly before Abe's
term. Not only has Japan been fighting with declining consumer prices,
deflation has also become a cause of concern. This is when most other countries
in the region are thriving well and making economic progress.
The tax hike has led Japanese people to put
off their purchases until later. People are delaying their purchases in the
hope of getting better deals later. Not just that, the fear of an imminent
crisis, has forced them to save their money. This has directly affected Japan's
domestic consumption which has gone down considerably.
However, the Bank of Japan (BoJ) has been
taking measures to improve the economy and fight people's fears. The BoJ
recently, doubled the country's money supply with an aim to counter deflation.
It has also lowered its interest rates.
The BoJ believes that with more money going
into the system, Japanese businessmen and consumers will have extra money to
spend on commodities -- they will make purchases that they have been purposely
delaying. This will, in turn, lead to an increase in the demand of supplies.
Since demand and supplies are directly co-related, the BoJ is hoping that an
increase in demand will also lead to an increase in prices.
However, these recent measures taken by the
BoJ have had a direct effect on the Japanese currency. As a matter of fact,
since past November, the Yen has gone down by almost 25% against the Dollar.
Source: James Summer, Global Co-Chief
Operating Officer of Equities - Acom Alliance
Contact: https://acomalliance.com
