MNI reports (citing “a source familiar with the BOJ’s economic analysis”):
- Bank of Japan staff are warning that the structural weakness of exports and consumption may hamper a sustained recovery
- “Policymakers may need to be concerned about the risk that Japan’s exports of capital goods may not increase as much as expected even when overseas economies recover”
- added that a recovery of the Chinese economy may not be supporting Japanese exports so much as in the past
- BOJ economists point to sluggish exports to Japan’s two key markets – the U.S. and China – where growth is recovering or expanding moderately but shipments of some items from Japan are not responding
They continue:
- In its monthly economic report released Tuesday, the government warned that in addition to slow overseas demand, a longer pullback in consumption after the April sales tax hike is now a downside risk to an economic recovery
- “Whether a virtuous cycle will be maintained depends on the following factors; private spending remains solid, capital investment is steadily implemented and exports rise, albeit at a slow pace,” said a third person who is familiar with the BOJ’s economic assessment
- Another government indicator is keeping BOJ officials cautious about the outlook. Core private-sector machinery orders, a leading indicator of capex, rebounded 8.8% on the month in June, posting the first rise in three months after a record 19.5% drop in May, but the increase was much smaller than forecast
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The next BOJ policy meeting is next week, September 3 and 4. Current expectations are for no change at this meeting.
