Sunday, January 12, 2014

Japan households less upbeat on economy despite 'Abenomics' - BOJ survey

TOKYO (Reuters) - Japanese households are less optimistic about the economy, a quarterly central bank survey showed, underscoring deep-rooted doubts over whether Prime Minister Shinzo Abe's stimulus policies will boost wages enough to make up for the rising cost of living.

The ratio of households who do not favour price rises remained stubbornly high around 80 percent, according to the survey, boding ill for the Bank of Japan's efforts to heighten inflation expectations with its pledge to achieve 2 percent inflation in a country mired in deflation for decades.

Japan's economic growth outpaced its G7 counterparts in the first half of last year, thanks largely to investor hopes for Abe's stimulus policies -- dubbed "Abenomics" -- before slowing in the third quarter due to soft exports.

Analysts expect the economy to pick up again as consumers try to beat a sales tax hike in April, although they worry about the damage the higher tax could do to the economy in the latter half of this year.

In a sign that consumers may already be worried about the pain from the tax hike, household sentiment on the current state of the economy and its outlook a year ahead both worsened in December from three months ago, the BOJ survey showed on Thursday.

Of the households who responded to the quarterly survey, 80.9 percent said they expect prices to rise a year from now, down from 83 percent three months ago.

Among those who expect prices to rise, 80.3 percent said they saw it as unwelcome, while 3.8 percent saw it as favourable. In the previous survey in September, 80.9 percent said rising prices were unfavourable.

The BOJ stunned markets by delivering an intense burst of monetary stimulus in April, pledging to accelerate inflation to 2 percent in roughly two years via aggressive asset purchases.

That was part of Abe's stimulus policies -- also consisting of fiscal expansion and a growth strategy to revive long-term growth -- that bolstered stock prices, weakened the yen and brightened the business mood.

Core consumer prices rose 1.2 percent in November from a year earlier, the fastest pace in five years, although much of the gain was due to the weak yen that boosted import costs.

Many analysts say wages would need to start rising more for inflation to accelerate and household spending to sustain its momentum. The government is urging companies to increase wages, though many firms remain hesitant of raising regular pay and instead hope to compensate employees with temporary bonuses.

yahoo.com

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