Manufacturer’s Optimism Declines

In a BOJ report released just before the recent elections, Japanese manufacturers expressed declining confidence to a “near three-year” low just following news of the economy shrinking from July to September of this year. This came despite the fact that the same manufacturers plan to boost capital spending by 6.8% year on year through March.

This may be due to the fact that before the election of the new government in Japan the BOJ was largely ignoring the very strong calls for increased economic stimulus to the Japanese economy, refusing to increase its $135 billion asset purchasing program to try and wrestle inflation back into the positive. The diplomatic row with China along with the earthquake on 3/11 haven’t helped manufacturer’s ability to produce. The increased energy costs of the shutdown of the country’s nuclear reactors has also sent production costs skyrocketing, increasing export prices, and a worsening trade picture can’t be aiding manufacturing prospects either. The diplomatic disputes with China have gotten particularly bad, as several anecdotes have been offered showing suffering manufacturers, like Japanese ping pong supply company Tamasu.

http://www.ft.com/cms/s/0/4df9caa0-45d3-11e2-b780-00144feabdc0.html#axzz2FONspIXT

One thought on “Manufacturer’s Optimism Declines

  1. the prof

    With the electoral landslide of the LDP-Komeito coalition, the BOJ faces pressure to set an explicit inflation target of 2%. But since easy money hasn’t worked in past years, it’s not clear that it will work now. After all, interest rates are low, liquidity high. It’s not lack of access to funds or their high cost that is stalling growth. It’s external and internal factors, the EU slowdown, the spat with China, high energy imports in the face of the shutdown of all but 2 of Japan’s nuclear reactors — which Prime Minister Abe seems intent to partially reverse. We’ll see whether his party is as eager on this and other fronts.

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