TOKYO--The Japanese government said in its annual economic report released Friday that the nation's economy is headed for a gradual recovery mainly due to reconstruction demand following last year's earthquake and tsunami that devastated northeastern Japan.
The report, approved by the Cabinet during a morning meeting, pointed out there was still much be done in areas hit by the tsunami, where the economy still suffers from weak consumer demand and a decrease in the number of retail outlets.
The report also said the nation has been recording trade deficits since the disaster due to a fall in exports, an increase in imports and a rise in import prices. Japan announced its first annual trade deficit since 1980 in January, with a deficit of 2.5 trillion yen for 2011.
The finance ministry announced Wednesday that for the January-June 2012 period, Japan posted a trade deficit of Y2.916 trillion, the largest deficit on record for the period.
"While Japan's economy is recovering from the severe damage suffered from the Great East Japan Earthquake, high-risk conditions continue with the recurring European debt crisis and supply constraints in electricity being some factors," Economy Minister Motohisa Furukawa said in a note released with the report.
Regarding monetary policy, the report points out that the Bank Of Japan's surprise easing in February--when it announced a Y10 trillion expansion in its asset-purchase program and a 1% inflation goal--had a sizeable impact on the bond, stock and foreign-exchange markets.
The report said that during the five business days following the announcement, the yen depreciated by 2.8% against the dollar.
Yields on five-year JGB's also declined, it said. "From these simple comparisons...we should point out afresh the importance of working on (market) expectations," it said.
The report points out that supply-demand gaps have been gradually narrowing, helping ease the decline in consumer prices.
The report said consumption has been gradually increasing due to the effects of policy measures, including an increase in automobile purchases thanks to subsidies for fuel-economy cars.
The nation's aging society is also having an impact on the economy, with consumers over the age of 60 helping to increase demand for travel, social activities and health and medical services.
However, the aging society also means the labor force is likely to keep shrinking while social security fees rise, burdening the nation's finances. The government's fiscal deficits continues to be high, it said.
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The report, approved by the Cabinet during a morning meeting, pointed out there was still much be done in areas hit by the tsunami, where the economy still suffers from weak consumer demand and a decrease in the number of retail outlets.
The report also said the nation has been recording trade deficits since the disaster due to a fall in exports, an increase in imports and a rise in import prices. Japan announced its first annual trade deficit since 1980 in January, with a deficit of 2.5 trillion yen for 2011.
The finance ministry announced Wednesday that for the January-June 2012 period, Japan posted a trade deficit of Y2.916 trillion, the largest deficit on record for the period.
"While Japan's economy is recovering from the severe damage suffered from the Great East Japan Earthquake, high-risk conditions continue with the recurring European debt crisis and supply constraints in electricity being some factors," Economy Minister Motohisa Furukawa said in a note released with the report.
Regarding monetary policy, the report points out that the Bank Of Japan's surprise easing in February--when it announced a Y10 trillion expansion in its asset-purchase program and a 1% inflation goal--had a sizeable impact on the bond, stock and foreign-exchange markets.
The report said that during the five business days following the announcement, the yen depreciated by 2.8% against the dollar.
Yields on five-year JGB's also declined, it said. "From these simple comparisons...we should point out afresh the importance of working on (market) expectations," it said.
The report points out that supply-demand gaps have been gradually narrowing, helping ease the decline in consumer prices.
The report said consumption has been gradually increasing due to the effects of policy measures, including an increase in automobile purchases thanks to subsidies for fuel-economy cars.
The nation's aging society is also having an impact on the economy, with consumers over the age of 60 helping to increase demand for travel, social activities and health and medical services.
However, the aging society also means the labor force is likely to keep shrinking while social security fees rise, burdening the nation's finances. The government's fiscal deficits continues to be high, it said.
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