World Economy

Japan Holds Fire on Further Fiscal Stimulus

Japan Holds Fire on Further Fiscal StimulusJapan Holds Fire on Further Fiscal Stimulus

The Bank of Japan has decided not to introduce more fiscal stimulus, days after the country showed improved first quarter GDP growth.

Japan’s policymakers have kept the central bank’s annual 80 trillion yen ($654.1 billion) monetary easing program in place after a two-day meeting, Yonhap reported.  

On Wednesday the government released figures showing Japan’s economy, which sank into a brief recession last year, expanded by a better-than-expected 0.6% from the previous quarter.

In annualized terms, growth was 2.4% between January and March – overshadowing an anemic 0.2% growth in the US economy.

Japan’s latest GDP data pointed to improved capital spending and a housing market showing signs of strength, although exports dipped slightly and consumer spending was weak.

“Japan’s economy has continued to recover moderately,” the bank said, slightly more upbeat that the language it used last month. The Bank of Japan (BoJ) also pointed to “declining” public investment.

Despite the slightly more positive tone from the Japanese government, Japan is a country that appears to have been in economic recovery for 30 years with many false dawns along the way.

Economic challenges remain plentiful in supply. BoJ governor Haruhiko Kuroda has been forced to push back a timeline for hitting a 2% inflation target – a central tenet of Prime Minister Shinzo Abe’s plan to kickstart the economy – although Kuroda insists that price rises are around the corner.

Stripping out the impact of a sales tax rise last year, Japan’s inflation rate in March came in at 0.2%, well short of the target.

That low figure had triggered speculation of further quantitative easing, although Japan is so far not increasing its economic stimulus.