Today in his speech Bank of japan (BOJ) governor Haruhiko Kuroda sounded pretty optimistic about Japanese economy and BOJ’s inflation target of 2%.
- According to him, Companies’ price and wage setting behavior have changed and there are signs of rising in base pay, which has not been seen for more than a decade and BOJ’s qualitative and quantitative easing (QQE) has been positive for overall economy.
- He also said BOJ’s QQE has been able to remove the slack in output gap and from here economy will be growing above potential leading to BOJ’s 2% inflation goal. He estimates economy to grow about 2% for this year and 1.5% for next. According to him Japan will be rare example of regime shift through macro-economic policy.
However as of now Japanese consumers does not seem to share his optimism, who are struggling with rise in taxes and higher prices so far reducing overall consumption.
- Japanese consumer confidence dipped in April to 41.5 well below 50, which marks a neutral point among optimism and pessimism. Around 8400 households are surveyed, who believe economic conditions are getting worse.
This pose serious doubts on BOJ’s estimation. There is no doubt that BOJ’s QQE has pushed yen sharply lower against major trading counterparts thus providing boost to exports and led to an impressive rally in Nikkei. However when it comes to economy and inflation there are little signs of success. BOJ originally envisaged inflation to reach target of 2% by 2015, which clearly has not been the case.
With little to take cue from Yen is continuing its range, currently trading at 119.5 against dollar.
The material has been provided by InstaForex Company – www.instaforex.com