International Partners says the Bank of Japan is facing more calls for more stimulus in the face of still-disappointing GDP data.
International Partners: Despite recent data showing that Japans economy shrank less than previously thought last quarter, the countrys central bank, the Bank of Japan (BoJ) is facing a growing clamor to inject more stimulus in the form of further quantitative easing.
According to the Cabinet Office, the worlds third biggest economy contracted by 0.3% in the second quarter (April June) slightly less than the 0.4% contraction reported earlier and beating forecasts for an upward revision to 0.5% but still disappointing enough for investors to call for an expansion of the banks already highly-controversial quantitative easing program.
So-called Abenomics, Prime Minister Shinzo Abes plan for reinvigorating the Japanese economy after 20 years of deflation, is being criticized for its apparent lack of success in kick starting meaningful growth and a failure to achieve the BoJs 2% per annum inflation target.
The BoJ has thrown everything but the kitchen sink at the problem but with anemic demand and consumer spending at home as well as sluggish growth abroad in Japans export markets, the near-term looks particularly challenging, said Mayumi Sheppers, Asian Capital Markets strategist at International Partners.
Because of the relative absence of the Japanese consumer, hopes for a recovery in domestic demand from capital investment and household spending are fading and this raises the prospect of an extraordinary budget that could include unprecedented fiscal stimulus from the government, said Sheppers.
International Partners says it sees the BoJ adding to stimulus. Japanese stocks have taken something of a lead from Chinas stock market woes of late. Theyve given back much of what they gained this year but were confident that the extra stimulus when it comes will ensure a resumption of their upward trajectory so were positioning our clients accordingly, concluded Sheppers.
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