Results from a central bank survey done every quarter showed that Japanese households remain less optimistic about the economy, emphasizing lingering doubts on Prime Minister Shinzo Abe’s stimulus policies and whether is has done enough to boost wages to counter the rising cost of living.
Around 80 percent of the households who participated in the survey do not agree with the rise in prices, highlighting the unsuccessful efforts of the Bank of Japan to heighten expectations with its pledge to achieve 2 percent inflation. While economic growth of Japan pulled ahead of its G7 counterparts in the first half of last year with the help of “Abenomics,” the prime minister’s stimulus policies for investors, it slowed by the third quarter because of soft exports. Analysts believe that the economy will pick up soon as consumers try to surpass a sales tax hike in April, but concerns on long-term effects of the higher tax are already being considered.
The survey showed that outlook in the current state of economy and the year ahead deteriorated in December from three months ago, suggesting that consumers may already be worried with the impending tax hike. 80.9 percent of the households say they expect prices to rise in a year, down from 83 percent three months ago. Out of those who expect it to rise, 80.3 percent do not agree with it, while 3.8 percent sees it as favorable. A previous survey conducted in September showed 80.9 percent of the households see the increase in prices as unfavorable.
Abe’s stimulus policies included BOJ’s monetary stimulus in April and promising to accelerate inflation to 2 percent in two years by buying assets. It also strengthened stock prices, brightened the down business mood and weakened the yen. The weakening yen helped boost import costs, which caused consumer price to rise by 1.2 percent in November and all analysts are in agreement in saying that increases in wages are needed to accelerate inflation and to sustain the momentum gained from household spending. Though the government continues to encourage companies to increase employees’ salary, a lot remain unwilling of increasing the regular pay and instead compensates by giving temporary bonuses.
[via Economic Times]