Japan’s economy has plateaued, according to nearly 80% of business leaders surveyed by the Nikkei, signaling a growing need for measures to bolster consumption and rein in the strengthening yen.
Of 147 corporate chiefs polled from Aug. 25 to Sept. 12, 78.9% said economic growth is flat. This is 0.1 percentage point higher than in June, when the last business survey was taken, and marks a hefty 26.5 point increase over December 2015, Nikkei reported.
Of those claiming flat growth, 82.8% laid responsibility at the feet of stagnant personal consumption, while 53.4% blamed the strengthening yen and 16.4% pointed to sluggish growth in emerging economies such as China.
The world economy overall is expanding, according to 48.3% of respondents. Of that group, 93% called the US economy a driver of growth, and 31% credited emerging economies other than China. For the 15% who said the global economy is deteriorating, China’s economic deceleration was the primary worry, followed by a European recession.
Taking Positive Steps
The government should lay out a “specific road map for social security reform” to help ease citizens’ worries about the future, a root cause of the lull in consumption, said a respondent at a large resource company.
A construction company executive called for discussions of deregulation to get more specific, saying Japan needs to accelerate efforts to foster economic growth driven by internal demand.
Reducing dependence on exports in this way has become a pressing task as the yen has appreciated this year. A number of companies have revised their yen exchange rate assumptions. “Large, sudden exchange-rate swings driven by speculation disrupt economic activity,” said a respondent at a trading house. “I expect the government to take steps to stabilize rates.”
Some 29.9% of business leaders also worry about declines in spending by international tourists in Japan, despite growth in visitor arrivals. This share is 11.4 points larger than in June. Visitors’ lower unit purchase price is a key factor, according to 86.4% of those respondents.
Bright Spots
In contrast to their pessimism about the economy, many executives had high hopes for labor reforms that Prime Minister Shinzo Abe has proposed. More than half said they expect the government to expand the so-called discretionary labor system, which compensates employees only for a certain number of hours established in advance.
Executives also expressed hope for an arrangement that would let them pay employees based on performance rather than time spent in the office.
Exports Fall
Japan’s exports were expected to post an 11th consecutive fall in August, a Reuters poll found on Friday, as weak foreign demand and a persistently strong yen took their toll.
Exports were seen likely to fall 4.8% in August from a year earlier, compounding July’s 14% drop, which was the most rapid decline since the global financial crisis in 2009.
The poll found imports were expected to drop 17.8% from a year ago to produce a trade surplus of 202.3 billion yen ($2 billion)—a third straight monthly trade surplus.
“Advanced countries’ economies continue to grow moderately but China’s economy is slowing down, so the global economy has not regained its momentum,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“In addition to that, the strong yen lowered both import and export prices.”
The finance ministry will issue the trade data on Wednesday Sept. 21.
Negative Rate
The Bank of Japan will conduct a “comprehensive review” of the effect of its monetary policy at its meeting Sept. 20-21.
The central bank will consider making negative interest rates the centerpiece of future monetary easing by shifting its prime policy target to interest rates from base money at the review, sources familiar with its thinking said.
The poll showed analysts were divided over whether the BoJ would cut its minus 0.1% interest rates even deeper next week.
Six of 11 analysts predicted the BoJ would keep its negative interest rates unchanged, while three expected the bank would cut its rates to minus 0.2%. Two said the rates would be lowered to minus 0.3%.
