Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.

Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.

All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.

Learn more about Globe Unlimited and how to subscribe.

Bank of Japan Govenor Masaaki Shirakawa speaks during a news conference in Tokyo on Oct. 30, 2012. (YURIKO NAKAO/REUTERS)
Bank of Japan Govenor Masaaki Shirakawa speaks during a news conference in Tokyo on Oct. 30, 2012. (YURIKO NAKAO/REUTERS)

Japan just mailing it in with latest stimulus Add to ...

The Bank of Japan has opted for a relatively modest easing of monetary policy, once again resisting growing political pressure for a more aggressive response in the face of worsening economic conditions and an overvalued currency that is derailing export profits. The central bank boosted its non-standard asset-buying of bonds and commercial paper (central bankese for money-printing) by ¥11-trillion ($138-billion U.S.) to ¥91-trillion.

The bank left interest rates unchanged, but at a range of zero to 0.1 per cent, it couldn’t cut them any further if it wanted to.

The bank also reduced its outlook for an economy that is rapidly losing steam as exports falter and the boost provided by the post-tsunami recovery efforts winds down. The bank now forecasts growth for this fiscal year of 1.5 per cent, down sharply from its earlier prediction of 2.2. Some private economists say another recession looms, as key export markets flounder, and a festering dispute with China over ownership of a handful of uninhabited islands in the East China Sea slices Chinese demand for Japanese consumer goods.

As might be expected, the market response was less than enthusiastic. The benchmark Nikkei 225 index reversed its recent upward trajectory and the yen rose against the U.S. dollar.

The main problem with central bank’s response, analysts say, is that it doesn’t begin to address the lack of demand for capital. And the dysfunctional government has yet to tackle badly needed structural reforms. Meanwhile, industrial production has fallen sharply and retail sales are coming in well below forecast.

The central bank’s latest forecast for price inflation was also a bit of a concern for deflation watchers. The bank now forecasts as CPI in fiscal 2014 of 0.8 per cent, below its medium to long-range target of 1 per cent.

The “bank’s view of fundamentals does not necessarily indicate that it will maintain a bias toward further easing, but [we] still believe the prospects of additional action could change on short notice,” if the yen appreciates rapidly or political pressure intensifies, Barclays said in a note.

In the know

Most popular videos »


More from The Globe and Mail

Most popular