27 Nov 2013
BoJ struggles to boost confidence on inflation targets
FXstreet.com (Barcelona) - The last BoJ minutes published yesterday, in which further evidence was gathered about the current split in inflation views by some board members - highlighting both economic and price risks titled to the downside -, is a reminder to market participants over the growing skepticism to Japan's ambitious inflation goals, suggesting that the elimination of deflation might be a task more arduous than previously anticipated.
As noted yesterday: "Board member Sato made a proposal in the semi-annual report that risk are somewhat titled to downside (important to note the change in tone here, omitting the line 'largely balanced'), while Board member Shirai proposed to be mindful of downside economy and price risks. Proposals were turned down by 8-1 vote."
Abenomics' plan is fundamentally anchored by 3 main pillars, that is, huge monetary base expansion, fiscal stimulus and structural reforms to boost the country's competitiveness, with the ultimate aim of creating a wealth virtuous cycle effect.
However, the main concerns continues to be on wage depression, which forces consumption to slow down, thus harder to provide incentive for higher prices. As Bloomberg reports: "A Nikkei survey of chief financial officers from 241 listed major companies released Nov. 25 tells the story. Companies are flush with cash, but are reluctant to share it with workers."
Bloomberg adds: "Executives are plenty keen on capital spending and research and development, but not on upping salaries. Publicly traded companies that end the fiscal year in March, Nikkei said, had record combined cash reserves of about $690 billion. The bad news: Only 7 percent of respondents said they may use some of these reserves to raise salaries. "On the whole, however, major companies remain cautious about upping wages," Nikkei said."
As noted yesterday: "Board member Sato made a proposal in the semi-annual report that risk are somewhat titled to downside (important to note the change in tone here, omitting the line 'largely balanced'), while Board member Shirai proposed to be mindful of downside economy and price risks. Proposals were turned down by 8-1 vote."
Abenomics' plan is fundamentally anchored by 3 main pillars, that is, huge monetary base expansion, fiscal stimulus and structural reforms to boost the country's competitiveness, with the ultimate aim of creating a wealth virtuous cycle effect.
However, the main concerns continues to be on wage depression, which forces consumption to slow down, thus harder to provide incentive for higher prices. As Bloomberg reports: "A Nikkei survey of chief financial officers from 241 listed major companies released Nov. 25 tells the story. Companies are flush with cash, but are reluctant to share it with workers."
Bloomberg adds: "Executives are plenty keen on capital spending and research and development, but not on upping salaries. Publicly traded companies that end the fiscal year in March, Nikkei said, had record combined cash reserves of about $690 billion. The bad news: Only 7 percent of respondents said they may use some of these reserves to raise salaries. "On the whole, however, major companies remain cautious about upping wages," Nikkei said."