The indicators that Japan’s economy is in contraction are increasing, and so are the calls for action. Bank of Japan Governor Masaaki Shirakawa will meet with other central bank policy makers today and many are hoping the gathering will result in the announcement of more progressive measures geared towards triggering growth in the world’s third largest economy.
Koriki Jojima, who recently took over as Finance Minister, asserted that changes to fiscal policy should be dependent on the status of the economy and therefore implemented as ‘boldly as needed’.
Another political change occurred at the beginning of this month as Seiji Maehara took over as Economy Minister. He is urging the central bank to contemplate purchasing foreign bonds. It is thought he may be present at future policy meetings after he stated it was ‘something that could happen’ if his frustration with the BOJ is not eased by action.
A former central bank official commented: ‘It’s a vicious circle. The BOJ is working hard to show its efforts to lawmakers, rather than deciding policies based on economic developments.’ Hideo Kumano then went on to say; ‘Politicians find BOJ policies aren’t helping the economy and they get frustrated.’
Floundering exports, increasing pessimism among manufacturers and a bold Yen have led many to believe that the Japanese economy will contract through to December. However, as the BOJ increased its asset-purchase fund in September economists – including Kumano – have forecast that the central bank won’t alter current policy for the time being.
That being said, the beginning of 2013 could see the BOJ adopting a more ‘hard-line’ stance. Early next year the central bank will engage in its five-yearly leadership shuffle and instating a Governor who will be tougher on easing is anticipated.
One senior economist noted; ‘Law makers are desperate to achieve something before elections in coming months [making the BOJ] likely to be forced to ease again’ – possibly as early as the end of October.
The Pound to Euro exchange rate is currently trading at 1.2451
The Pound to US Dollar exchange rate is currently trading at 1.6109
The Pound to Australian Dollar exchange rate is currently trading at 1.5775
The Euro to US Dollar exchange rate is currently trading at 1.2936
The Euro to Pound exchange rate is currently trading at 0.8030
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