TOKYO (Reuters) – The Bank of Japan’s negative interest rate policy has had little positive impact on the economy and prices, over half of economists surveyed by Reuters said.
The views underline the mounting challenges facing the central bank in trying to fire up inflation to its 2% target, as years of ultra-loose monetary policy and near-zero rates have had only modest success at the cost of eroding financial institutions’ margins.
That explains why a majority of the polled economists expect the next move by the BOJ would be to taper its massive stimulus, possibly sometime next year.
It also suggests criticism over the controversial policy is spreading beyond Europe, where countries such as Switzerland are under increasing pressure to adjust its ultra-loose policy to address the demerits of negative rates.
Among the 41 economists polled by Reuters Jan. 6-17, 24 said the BOJ’s negative rate policy did not help the economy and prices, while 17 said they did.
“Negative rates may have had some positive effects on financial and property markets. But the side-effects, such as the hit to banks’ earnings, have also been big,” said Mitsumaru Kumagai, chief economist at Daiwa Institute of Research.
“As a whole, we don’t think there has been much positive effect” on Japan’s economy and prices, he said.
The poll also showed 28 of 42 economists, or 67%, expect the BOJ’s next step to be a withdrawal of stimulus, up from 61% in the December poll. Those who predicted such action said it would happen sometime next year or later, the poll showed.
The ratio of those who predict the BOJ’s next move to be an expansion of stimulus stood at 33%, down from the previous month’s 39%.
“We don’t expect the BOJ to ease further in the near term,” said Arata Oto, market economist at Societe Generale Securities Japan.
“The BOJ is expected to maintain its scenario projecting a pick-up in global growth, while sticking to its easy-policy bias to help the economy build momentum to hit its 2% inflation target,” he said.
That view was backed by a Reuters poll predicting that the BOJ will keep monetary policy steady and nudge up its economic growth forecast at a two-day rate review ending on Tuesday, signaling that no immediate easing was forthcoming despite lingering overseas risks.
STAGNANT GROWTH AHEAD
Under a policy dubbed yield curve control, the BOJ guides short-term rates at -0.1% and the 10-year government bond yield around 0% via aggressive asset buying.
Inflation remains distant from the BOJ’s 2% target despite years of heavy money printing, forcing the central bank to maintain a radical stimulus program despite the rising cost such as the hit to financial institutions’ profits.
Analysts polled expect core consumer inflation, which includes oil products but not fresh foods, to hit 0.6% in the current fiscal year ending in March and 0.5% the following year.
They also expect Japan’s economy to have shrunk an annualized 3.6% in the October-December quarter due to the hit from October’s sales tax hike, and rebound by a modest 0.8% in the current quarter.
Japan’s economy will likely expand 0.5% in the fiscal year beginning in April and 0.8% the following year, thanks in part to an expected boost from the government’s $122 billion fiscal stimulus package, the poll showed.
(Reporting by Kaori Kaneko; Polling by Shaloo Shrivastava and Khushboo Mittal; Editing by Leika Kihara & Shri Navaratnam)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
