BOJ sees growth rebounding in coming year

Lower crude prices are just filling the coffers of the corporations that import the oil as the prices at the pump haven't changed a wink. When the companies get around to dropping prices at the pump, after all the excuses they make for not doing so, the cost of world crude will probably go up again and the price of gas will rise proportionately.

It said lower crude oil prices would

Would what?

be positive for inflation over the long term?

The BOJ estimates the economy will contract 0.5 percent in the April 2014-March 2015 fiscal year. It previously forecast 0.5 percent growth. The bank cut its inflation forecast, excluding the tax hike, to 0.9 percent from 1.7 percent. It is targeting 2 percent inflation as part of its monetary stimulus goals.

So despite all its loose money policies, the economy shrank in 2014, even though the BOJ said it would rise, and, inflation was only one-half of what it projected. But, everyone should believe that the economy will grow 2.1% in 2015, and inflation will finally hit the 2.0% target. If it were not so tragic that billions and bilions of yen are being spent behind this failed direction, this would be comical.

And when was the next planned tax hike?

So despite all its loose money policies, the economy shrank in 2014, even though the BOJ said it would rise, and, inflation was only one-half of what it projected. But, everyone should believe that the economy will grow 2.1% in 2015, and inflation will finally hit the 2.0% target. If it were not so tragic that billions and bilions of yen are being spent behind this failed direction, this would be comical.

The economy grew rather well in 2013. It only faltered in 2014 with the consumption tax hike and subsequent currency devaluation weighing in on import prices.

Now with oil prices lower and nominal wages finally rising as well as the effects of the consumption tax hike beginning to falter, you can expect growth FY 2015.

The economy grew rather well in 2013. It only faltered in 2014 with the consumption tax hike and subsequent currency devaluation weighing in on import prices.

Bach -- so what? 2013 is ancient news. And if the BOJ could not accurately predict the impact of the tax hike, then Japan is in real trouble.

Now with oil prices lower and nominal wages finally rising as well as the effects of the consumption tax hike beginning to falter, you can expect growth FY 2015.

Pure speculation on your part. I could just as easily say that with the Chinese ecomony slowing down, and many Japanese companies being large exporters to that country, that the economy will be hit hard.

"So despite all its loose money policies, the economy shrank in 2014,"

that was due to the consumption tax hike. the economy was growing before that, just like the US economy grew after it implemented loose monetary policy.

that was due to the consumption tax hike. the economy was growing before that, just like the US economy grew after it implemented loose monetary policy.

Jeff -- for a guy who claims to make his money giving economic/financial advice to clients, you sure make some amazing statements. First off, if the tax hike threw the Japanese economy into a tail-spin, then the loose money policy has not really generated any organic growth, especially in domestic consumption. All it has done was artificaly pump up the economy with the usual pork-barrel spending. Second, the U.S. economy did grow, as you said, but it was for the opposite reason of Japan, not "just like". The Japanese loose money simply drove down the yen which gave a short-term shot in the arm to exporters. As I stated, it has not shown any real staying power in terms of establishing domestic consuption growth. The U.S. was just the opposite. In case you missed it, the dollar is trading at near record highs.

with the Chinese ecomony slowing down, and many Japanese companies being large exporters to that country, that the economy will be hit hard.

Japan export to China accounts for only 3% of GDP.

that was due to the consumption tax hike. the economy was growing before that,

That's cherry picking. The economy was growing before the consumption tax, due to the consumption tax.

There will be a boost to growth ahead of the 2017 hike as well, as people make their purchases in advance.

Also, if one were blaming higher prices due to the tax hike for the recession, the depreciated currency has also contributed to higher prices, but not yet delivered the boost to exports that theory said would occur. The government needs to make it easier to operate business in Japan if it wants production ramped up here.

"you sure make some amazing statements."

Feel free to check the JT forum archive. You'll find that every call I've made on the Japanese economy over the years has turned out correct.

"The Japanese loose money simply drove down the yen which gave a short-term shot in the arm to exporters."

IF it werent for "loose money" and other stimulus policies, the 2008 disaster would still be with us. Like Greece, which was forced into the opposite policy direction: austerity. Boy that worked well, didnt it? YOu might have noticed that now the Europeans, having watched the QE experience in the US and Japan, have decided to follow suit with "loose money."

"That's cherry picking."

There is broad consensus that's Japan recession was triggered by the consumption tax hike. Japan had recovered by 2013, when "Japan is back" was the mantra, and the first 2 arrows of Abenomics were actually working and were highly appraised. However, you cant mix stimulus with austerity....at the same time, which is what happened and the downturn came as a result.

Lower crude prices are just filling the coffers of the corporations that import the oil as the prices at the pump haven't changed a wink.

Welcome to Japan. When the yen gained 40-odd percent against the dollar and euro, imported goods from America and Europe didn't go down a wink.

IF it werent for "loose money" and other stimulus policies, the 2008 disaster would still be with us. Like Greece, which was forced into the opposite policy direction: austerity. Boy that worked well, didnt it? YOu might have noticed that now the Europeans, having watched the QE experience in the US and Japan, have decided to follow suit with "loose money."

Nonsense, I would argue that the opposite has happened, and that loose money policies have not at all helped ordinary people, many of whom are still unemployed, and most of whom have seen wages stagnate or decrease. Almost all of the benefit of loose money policies has gone to the stock market, and to the bonuses of CEO's and executives. Japan is in recession, Europe is hovering on the edge of recession, Switzerland has cut their financial ties with the Euro with the expectation of monetary easing by the ECB. Only America is showing any improvement, and that is purely, 100% related to the decrease in oil prices, and not due to America's QE or stimulus programs.

you cant mix stimulus with austerity

What "austerity"? The last there years have seen three consecutive spending increases. Can you name any program which has seen a reduction in spending?

The government couldn't stimulate itself in a Bangkok brothel, let alone stimulate the economy. It is neither the government's right nor responsibility to manage or stimulate the economy in any way. All they have to do to cause growth is to stop interfering. Our national economies are not governments' responsibility, these economies belong to the people. We know from generations of experience that centrally-planned economies fail. They always have, they always will. We are watching such failures occur before our eyes right now.

That's cherry picking. The economy was growing before the consumption tax, due to the consumption tax.

Spot-on. If it were not for the increased consumption in anticipation to the hike, there would have been no growth worth mentioning.

There is broad consensus that's Japan recession was triggered by the consumption tax hike

You mean there is no chance that the recession might have been caused by the fact that there are some hundreds of thousands fewer Japanese consumers every year? More than half of what Japanese companies made is not exported, it is domestically consumed. When there are fewer consumers in the domestic economy, sales decrease. When sales decrease, so do employment, wages, and tax revenues. As long as Japan's companies are dependent on domestic sales, they will continue to earn less as the population falls. And as more and more of the export market is supplied by China, Korea, Vietnam, etc, there is little chance that Japan can increase sales and earnings in exports.

Japan is simply not competitive. People are not competitive, business is not competitive, everything is stagnant and in decay. The government can tax, spend, and stimulate all it likes, it is not going to help. It is the people who need to wake up, shake off their chains, and make their lives and country a better place. They need to think and work for themselves, and realize that there are far better ways to live than to be a lifetime employed wage-slave for a "famous company". They need to realize that they need to work for their own success, not someone else's, and that by being successful as they can, they can do far more to help their fellow people and the national economy than the government is capable of doing. Somehow the masters have become the servants, people need to wake up and realize that their lives are their own, that companies and businesses answer to them, and that the government is supposed to serve them, not take care of them. Anyone with half a brain can provide their own employment, food, medical care, and pension, and do it for less than what they think.

" and that loose money policies have not at all helped ordinary people,"

A couple of friends bought family homes in Tokyo recently. They are more than pleased with their minuscule interest rates on their mortgages, provided by the loose money policy.

Only America is showing any improvement, and that is purely, 100% related to the decrease in oil prices, and not due to America's QE or stimulus programs.

More reality distortion. The US started to pick up before the oil price plunge, which is actually quite recent. Furthermore, all industrial economies benefit from lower oil prices, Japan more than the others, since it has to import the stuff. America is hurt more, because it has a a significant oil producing industry, which is watching its profits drain away. Your ability to turn reality upside down -- and pick up "good" ratings -- is quite astounding.

To amend my earlier statements, QE in Japan has run its course. At this point it is neither helpful nor harmful. But if we didn'T have it post-2008, the economy would have plunged into a downward spiral long ago.

A couple of friends bought family homes in Tokyo recently. They are more than pleased with their minuscule interest rates on their mortgages, provided by the loose money policy.

Beyond stupidity...

Since interest rates are now so low, banks can't earn money on interest or government bonds, and must now focus on derivatives and riskier deals. The over-priced stock market is way over-leveraged. Hence we have a fragile, balloon-like economy where company profits on sales tepid at best, and whose only good figures are their stock prices, which are over-inflated by low-interest money borrowed by companies to buy back their own stock.

I am in the mood to read some more stupidity, looking forward to your next post.

The government needs to make it easier to operate business in Japan if it wants production ramped up here.

Cheaper yen and corporation tax cut are helping some J companies to come back from China.

What "austerity"?

The tax hike.

Feel free to check the JT forum archive. You'll find that every call I've made on the Japanese economy over the years has turned out correct.

LOl.

"IF it werent for "loose money" and other stimulus policies, the 2008 disaster would still be with us. Like Greece, which was forced into the opposite policy direction: austerity. Boy that worked well, didnt it? YOu might have noticed that now the Europeans, having watched the QE experience in the US and Japan, have decided to follow suit with "loose money.""

Is that supposed to be a joke?? Not only is 2008 still with us but it has been thickly papered over with freshly printed Weimar-money. What's coming will make 2008 seem like a picnic. The Swiss just effectively threw the euro under the bus, separating before the collapse of the euro. The wind is blowing on the house of cards.

"Beyond stupidity...Since interest rates are now so low, banks can't earn money on interest"

Banks earn money on the interest rate spread -- the difference between the rate they charge and what they pay -- not on the level of interest rates. Spreads move in response to a variety of market conditions. Sorry, for reciting a "fact." Doesnt mesh well with your narrative,does it.

QE doesnt force them to do anything. There is a range of products available at various risk levels they can spend their newly acquired cash on. Before In 2008, they willfully chose to deal in dodgy products debt backed by toxic subprime debt, causing the meltdown. And in the US, this was before any QE. So the real risk of meltdowns lies with the private sector institutions, not in central bank policy.

"What's coming will make 2008 seem like a picnic......The wind is blowing on the house of cards."

I've been arguing with guys over the past couple of years, and nothing -- nothing - you've ever said has come true. Mostly opposite has occurred. Like QE 1,2 and 3 debasing the dollar and Obama collapsing the economy. LOL. Everything I've predicted has been true.

Cheaper yen and corporation tax cut are helping some J companies to come back from China.

True, but it hasn't really been borne out so significantly in the figures. Export volumes haven't increased nearly as much as Abenomics proponents would have liked.

Japan needs much, much more economic activity. The yen is cheaper which is indeed a support, but the yen being cheaper alone doesn't mean that it isn't still a big hassle to do business here due to the excessive and ever-increasing regulations.

Have you seen the news about the proposed labour law changes for people making over 10 million yen a year? What is the government doing? This sort of rule effects hardly anyone, and people who are making over 10 million are probably looking after themselves just fine. Such tinkering is a waste of time and effort. The government needs to get Japan really back open for business, and not come up with such a myriad of obscure, weird laws to govern everything.

The tax hike.

The tax hike (=austerity) hits consumption yes, but rising import prices from the hugely and rapidly depreciated yen brought on by Abenomics does so as well. With domestic consumption making up 60% of the economy, this shouldn't be ignored.

Further, steps to get the government's finances back in shape will support consumption over the longer term, as the government getting its act together will mean people won't need to save as much precautionarily. I'm all for slashing government spending myself; the government opted to go the consumption tax hike route, but both ways are still better than spending like crazy and pretending as JeffLee does that it can only be positive and risk-free to do so, forevaaaa.

On the contrary, the UK was pilloried for its austerity approach initially, only for the IMF to later turn around and recognise that the UK's approach had been sound. Other countries with free-floating currencies such as Japan should take note. (As for Europe, they are screwed since they are operating a fixed-rate currency peg scheme - I believe it will eventually fail like the Swiss franc peg did).

At the end of the day, Japan's stock market had doubled in 2013. If Japan couldn't handle a 3% tax hike the following spring, when could it? The answer is never, and that's not good enough.

JeffLee,

Banks earn money on the interest rate spread -- the difference between the rate they charge and what they pay -- not on the level of interest rates. Spreads move in response to a variety of market conditions.

That's theory. In reality these spreads have been decreasing for years.

My read is that there isn't much demand for loans in Japan, so the banks have had to decrease the spreads to try to drum up business. (Foreign banks have resorted to just shutting up shop in Japan.) Our beloved but essentially useless and potentially harmful QE hasn't changed this trajectory.

Before In 2008, they willfully chose to deal in dodgy products debt backed by toxic subprime debt

I hear the US government is trying to create a new subprime bubble at the moment. I predict right here that when it blows up you'll blame it all on the evil banks for their participation, rather than the mistaken government policy of encouraging risky loans to be made in the first place.

Everything I've predicted has been true.

You produce an aweful lot of nonsense to believe that people actually pay you to write stuff...

"Everything I've predicted has been true."

Only in the near term, pal. Go ahead. Live like it's 1929.

@Storm

Whence the idea that working as an English teacher somehow precludes one from understanding economics?

I wouldn't tell you that my understanding of English is superior to yours because your a "tradesman".

Luc it doesn't but the fact that someone at the coal face will have more first hand knowledge than the one who sits in the office.

Anyway if you have an grasp on business or economics first hand and are good at it then you should be applying it .

Its a bit like the armchair sportsman, he knows all about the game but cant actually play it

@Storm

All right , point taken

Export volumes haven't increased

It takes time for companies to come back.

Have you seen the news about the proposed labour law changes for people making over 10 million yen a year?

Better than nothing. I think many public servants will be affected.

With domestic consumption making up 60% of the economy this shouldn't be ignored

I think domestic consumption is higher, yes higher import is a big problem.

get the government's finances back in shape

If you subtract JGB owned by JOB, I think the rest of outstanding JGB is smaller now.

I think many public servants will be affected.

If they were the ones making more than 10 million then that'd be a different problem.

If you subtract JGB owned by JOB, I think the rest of outstanding JGB is smaller now.

In history, bad stuff has happened in the past when central banks just bought up all the debt their government issued.

If they were the ones making more than 10 million..

That's my guess. Not many private people who make more than 10 million would be receiving OT.

central banks just bought up all the debt

I didn't say they bought up, I said the debt may be smaller.

Check this out , some of us know what this says in the description, this may help some of you

http://www.japantoday.com/category/advertorial/view/how-you-can-change-your-financial-future#comment_1915039