Japan faced with gloomy economic data ahead of tax hike
By Miwa Suzuki ,AFPTOKYO -- Japan produced a gloomy batch of economic data Monday showing shoppers growing nervous and the trade deficit ballooning, as Prime Minister Shinzo Abe prepares to launch a controversial sales tax rise.
February 11, 2014, 12:10 am TWN
The government said consumer sentiment weakened in January, while the current account surplus — the broadest measure of trade with the rest of the world — hit a record low in 2013 as the cheap yen pushed up energy bills.
A policy blitz by Abe, which meshes government spending with central bank monetary easing, has driven the yen down and boosted stock prices, earning him acclaim for kickstarting the long-sluggish economy.
A recent tally of the Nikkei economic daily showed nearly 70 percent of listed Japanese companies are likely to post sales and profit growth in the current business year to March.
However, many firms have yet to embrace Abe's call to hike wages. A poll by Kyodo news agency last month showed nearly three-quarters of Japanese people are feeling no effect from the so-called Abenomics.
Worryingly for the premier, it also showed that only 17 percent of firms — around a sixth — are planning to hike wages, even as Japan begins to experience real inflation for the first time in several years.
Monday's data from the Cabinet Office showed the consumer sentiment index fell to 40.5 in January, the lowest level since 39.9 in December 2012. A reading below 50 indicates pessimism.
The subindex on views on livelihood fell to its lowest reading since June 2011 and that on willingness to buy durable goods dropped to the weakest since May 2011 — suggesting the mood is as gloomy as the months soon after the earthquake-tsunami that wrecked the northeast coast and hammered the economy.
Separate data from the finance ministry showed Japan had a surplus of 3.31 trillion yen (US$32 billion) on its current account in 2013, the weakest on comparable data stretching back to 1985.
The current account is the broadest measure of the country's trade with the rest of the world, including not only trade in goods but also services, tourism and returns on the country's foreign investment.
Government leaders last month said they were winning the war on stubborn deflation as consumer prices logged their their first rise for five years in 2013.
But the rise was largely driven by soaring import bills due to a cheap yen and the country's reliance on importing expensive fossil fuels since its nuclear plants were shuttered after the tsunami-sparked Fukushima crisis.
Japan's trade deficit more than doubled to 10.6 trillion yen in 2013 from the previous year as costlier imports of oil and gas overwhelmed export growth.
Abe has decided to follow through on a pledge by his predecessor to hike Japan's 5.0 percent sales tax to 8.0 percent in April.
The move is seen as a crucial first step towards bringing down an eye-watering national debt, but naysayers fear it will derail Japan's budding recovery.
Some economists say continuing trade deficits may be a sign that Abenomics is actually succeeding.
Unlike previous recoveries in Japan, his policy of much greater monetary easing and bringing inflation into the economy is aimed more at domestic consumption than pushing goods overseas.
“If Abenomics succeeds, domestic demand-led economic growth will be achieved, making current account deficits a more regular feature of the Japanese economy,” predicted Koya Miyamae, economist with SMBC Nikko Securities.