TOKYO (MNI) – Economists have revised down their forecasts for
Japan’s economic growth for this fiscal year and fiscal 2011 while
projecting prices in fiscal 2011 and 2012 may not rise as much as
expected earlier, according to the latest monthly survey by the Cabinet
Office’s Economic Planning Association released on Thursday.
The survey also showed that the number of the economists who expect
the Bank of Japan to ease credit further totaled 23, unchanged from the
previous survey.
Meanwhile, economists expecting a credit tightening next year
totaled 17, down from 18 in the previous survey. Respondents for the
question totaled 40 in November, down from 41 in the previous survey.
The survey showed that economists expect the year-on-year change in
core consumer prices to return to positive territory in fiscal 2012 with
a 0.19% gain over fiscal 2011, revised down slightly from +0.21%
projected in October, after posting three years of continued price drops.
The average economist forecast for the core CPI (excluding fresh
food) for fiscal 2011 ending on March 31, 2012 was -0.20%, revised down
from -0.17% forecast in the October survey.
It is much weaker than the latest median projection by the BOJ
policy board at +0.1% for the next fiscal year that was presented at the
Oct. 28 policy meeting.
The average forecast for the core CPI was -0.90% in the current
fiscal year that began on April 1, unchanged from the previous survey.
At the Oct. 4-5 policy meeting, the BOJ adopted “comprehensive”
monetary easing — a hybrid policy targeting both the level of borrowing
costs and the amount of fund injections — through lowering interest
rates, buying riskier assets and making loans to banks that are lending
to growth areas.
But it has not prompted private-sector economists to project
brighter growth and inflation prospects as the uncertainty over
sustained global recovery lingers.
The association polled 42 economists and research institutions from
Oct. 27 to Nov. 4 for its ESP Forecast, and 41 answered on the growth
and inflation outlook and 40 on the BOJ’s monetary policy stance.
The previous survey was conducted from Sept. 8 to Oct. 12.
The latest survey showed that the economists on average continued
to predict that the core CPI will remain in negative territory for 13
straight quarters from the first quarter of 2009 through the first
quarter of 2012.
Japan’s core consumer prices fell 1.1% in September from a year
earlier, the 19th straight y/y drop, as retail discounts and subsidies
for high school education continued to offset higher energy costs.
The pace of decline in the core CPI — excluding fresh food but
including energy — accelerated from -1.0% in August to -1.1% in
September, matching the July decline partially because gasoline and
other energy price increases slowed.
According to the Oil Information Center, the average price of
regular gasoline in Japan rose only 3.1% y/y in September, compared with
+6.1% in August.
For the whole of fiscal 2009 that ended on March 31, the average
national CPI fell 1.6% after rising 1.2% in fiscal 2008. The FY09 drop
was the first in five years, since -0.2% in fiscal 2004.
Meanwhile, the average economist forecast for real GDP growth was
revised down slightly to +2.06% from +2.09% for fiscal 2010 and down
further to 1.37% from 1.46% for fiscal 2011, the ESP survey showed.
The average forecast for fiscal 2012 GDP was +1.84%, up slightly
from 1.81% in the previous survey.
These forecasts are somewhat weaker than the BOJ board’s Oct. 28
median projection at +2.1% for fiscal 2010, +1.8% for fiscal 2011 and
+2.1% for fiscal 2012.
Bank of Japan Governor Masaaki Shirakawa has explained that the
central bank’s forecasts reflect its conviction that a series of
monetary easing measures will have a bigger impact as the economy
returns to a sustained recovery track.
According to the latest survey, economists expect a sharper 0.88%
contraction in annualized GDP in the final quarter of 2010, compared
with a 0.21% drop forecast previously. They also revised down their GDP
outlook for the first quarter of 2011 to +1.00% from +1.16%.
On the other hand, the average GDP forecast for the third quarter
of this year (due out on Nov. 15) was revised up to +2.31%
annualized from +2.11% in the previous survey.
In the monthly survey, the association also asked economists when
they expect the BOJ to change its policy stance.
Of the 40 economists who provided their forecasts, 15 expected the
BOJ to ease its policy stance by the end of this year, down from 23 in
the last survey. Eight economists expect a BOJ easing in 2011, compared
with none in the previous survey.
A total of 17 projected that the BOJ would tighten credit next
year, down slightly from 19 in the last survey. Almost all of them see a
tightening in or after October 2011. The forecasters are basically
choosing the latest timing available in the survey, which is in 12
months or later.
At the Oct. 4-5 meeting, the board lowered the target for the
overnight lending rate among commercial banks to a range of zero to 0.1%
from 0.1%, which is aimed at influencing interest rates up to two year
maturities without killing off the interbank money market functions.
The BOJ has also made it clearer that it will maintain the
extremely accommodative policy stance until it is convinced prices will
stabilize and won’t slip back into deflation, hoping to prolong the
effects of the credit easing.
The BOJ has launched a temporary fund on its balance sheet for
buying a total of Y5 trillion in financial assets including Japanese
government bonds, commercial paper, corporate bonds, exchange-traded
funds (ETFs) and Japan real estate investment trusts (J-REITs).
tokyo@marketnews.com
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