The Japanese economy is on course for a slow but steady recovery;
according to one of the most respected figures in Japanese finance industry.
Graham Palm, the Executive Vice President at Shizuoka Financial, pointed to
favourable signals being given by the country's central bank, as well as
hopeful signs in recent growth figures.
Mr. Palm echoed the words of Haruhiko Kuroda, the Governor
of the Bank of Japan, who promised that the bank would remain ready to act in
the interests of the national economy if the need arose for it to do so. Mr.
Kuroda stated that a moderate recovery was underway, despite continuing
problems in encouraging Japanese consumers to spend.
Research carried out by Shizuoka Financial chimes with the
relatively bullish public statements given by Japanese government figures over
recent weeks. The country's low inflation rate remains a cause for concern,
according to the company's analysts, with a two-year period in which the BOJ
was supposed to have brought inflation to a 2% target - something already
considerably behind schedule.
Mr. Palm said that, while Japan had entered uncharted
territory by introducing negative interest rates in January 2016, there was
still scope for a modest expansion in the Japanese economy over the coming
months. Nevertheless, he cautioned that many important economic indicators
remained stubbornly unhelpful; consumption, demand, and output were all
continuing to fall despite the BOJ's continuing efforts to stimulate growth.
He further warned that it was unwise to expect anything more
than a limited recovery in the short term, given that Japan's leading economic
indicator had fallen to its lowest level in four years, and that the country's
Cabinet Office had admitted that a recessionary phase was now not merely a
danger, but a current fact.
The attitude of the U.S. Federal Reserve toward the yen is
seen as crucial by Mr. Palm to improving prospects for the Japanese economy. He
pointed to the continuing retreat from the dollar by investors, with the yen
being seen as a safe haven; this had led the currency to rise to its highest
level against the dollar since the fall of 2014. Interest rates were unlikely
to rise significantly in the near future, he suggested.
Kuroda's words about consumer inflation were picked out by
Mr. Palm as being central to the chances of recovery: the Governor declined to
say exactly when the 2% target would be met, merely that Japan would
"accelerate toward" it at an appropriate pace. Even so, inflation was
likely to remain near zero for some time, given the emphasis placed by the
central bank on stability. Additional measures would probably center on the
purchase of assets, he added.
