BOJ Signals Readiness to Boost Lending as Exports Tumble Most Since 2009
Japan Swings to Trade Deficit in April as Exports Slump
Tomohiro Ohsumi/Bloomberg
Shipping containers are stacked at a port in Tokyo.
Shipping containers are stacked at a port in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg
May 23 (Bloomberg) -- Hiromichi Shirakawa, chief Japan economist at Credit Suisse Group AG in Tokyo and a former Bank of Japan official, talks about the impact of the March 11 earthquake on the country's economy. Shirakawa speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
May 19 (Bloomberg) -- Seijiro Takeshita, a senior strategist at Mizuho International Plc, talks about the outlook for Japan after the economy shrank a more-than-expected 3.7 percent in the three months through March. He speaks with Francine Lacqua on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)
May 19 (Bloomberg) -- Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo, talks about the outlook for economic growth in Japan. He speaks with Mark Barton on Bloomberg Television’s “Global Connection.” (Source: Bloomberg)
May 19 (Bloomberg) -- Yuuki Sakurai, president at Fukoku Capital Management Inc. in Tokyo, talks about the outlook for Japan's economy and central bank monetary policy and currency. Japan’s economy shrank more than estimated in the first quarter after the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back spending, sending the nation to its third recession in a decade. Sakurai speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
May 19 (Bloomberg) -- Naomi Fink, a Japan strategist at Jefferies & Co. in Tokyo, talks about the outlook for Japan's economy. Japan’s economy shrank more than estimated in the first quarter after the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back spending, sending the nation to its third recession in a decade. Fink speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
The Bank of Japan indicated its willingness to expand lending programs to support reconstruction efforts after the nation’s record March 11 earthquake crippled factory production and pushed the economy into a recession.
“We’re examining whether there’s a way to enhance” a 3 trillion yen ($37 billion) lending program for industries that can spur economic growth, Governor Masaaki Shirakawa said in a speech in Tokyo today. Many BOJ board members in April discussed the potential need to expand a 1 trillion yen loan program designed to help companies in the aftermath of the quake, a record of the meeting released today showed.
Exports slumped at their fastest pace since October 2009 in April, a Finance Ministry report showed today, resulting in the first trade deficit for the month in 31 years. The central bank may hold off from boosting asset purchases, its main policy tool, until the government unveils its next spending package in coming months, according to analyst Hiroaki Muto.
“The BOJ won’t hesitate to boost support for quake- rebuilding and expand the 1 trillion yen quake-aid loan program,” said Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “They’ll probably hold off on further action until July or August, timing their policy move to coincide with the government’s second extra budget.”
The bank last month unveiled the one-year loan program for banks, aimed at getting funds to companies hit by the quake. The record quake and tsunami in northern Japan left about 24,000 people dead or missing, and the government estimated that damages could be as high as 25 trillion yen.
Record Cash Injection
The BOJ injected record amounts of cash into the money market after the quake, and doubled to 10 trillion yen a fund that buys assets including corporate debt to real estate investment trusts. It has kept the benchmark overnight rate between zero and 0.1 percent since October.
Supply-chain constraints and power shortages caused by the record temblor have disrupted production and slowed overseas sales, prompting companies including Sony Corp. to forecast earnings below analysts’ estimates. The value of automobile shipments, a driver of overseas sales, fell to its second lowest level on record since data began in 1979, today’s report showed.
“A huge drop in economic activity in coming months is inevitable, though we may see a rebound toward the end of the year if production recovers,” said Yuichi Kodama , chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “Recent economic data indicate that the blow from the earthquake is bigger than people anticipated.”
Shipments to the U.S. fell 23.3 percent in April from a year earlier, the biggest decline since October 2009, the report showed. Exports to China, Japan’s largest market, fell 6.8 percent, the first decline since October 2009. Sales to Europe fell 10.7 percent, the first drop in three months.
Sony’s Struggle
Sony, Japan’s largest exporter of consumer electronics, is struggling to improve its earnings after the earthquake crippled factories and hackers invaded its online entertainment services. Operating income in the 12 months ending March 2012 will be similar to the 200 billion yen last fiscal year, the Tokyo-based company said in a preliminary earnings statement released this week. The forecast missed the 254.7 billion yen average of nine analyst estimates compiled by Bloomberg.
The nation’s economy shrank in the three months through March as consumers and companies cut back spending and exports fell after the disaster, sending the nation to its third recession in a decade. Gross domestic product will probably contract at a 3.3 percent annual pace this quarter before growing in the second half of the year, according to the average forecast of 43 economists in a survey by the government- affiliated Economic Planning Association released on May 16.
Growth Slows
Economic and Fiscal Policy Minister Kaoru Yosano said yesterday growth for the year ending March 31 may be around 0.6 percent or 0.7 percent, less than half the government’s 1.5 percent forecast made before the quake.
Shirakawa voiced optimism that the economy is recovering as companies get repair factories and resume production.
An easing in supply constraints and corporate efforts to restart output “suggest that Japan’s economy has started to move toward recovery from the tumble immediately after the earthquake,” Shirakawa said. “In the second half of fiscal 2011, the sense of recovery will be somewhat more noticeable, although it will fall short of a V-shaped recovery.”
Shirakawa reiterated his opposition to the central bank underwriting or monetizing government debt, warning that it can erode confidence and weaken fiscal discipline.
‘Something From Nothing’
“It should be noted that there is no magic wand that creates something from nothing,” Shirakawa said. “If the government depends on the central bank’s underwriting and ignores the market’s risk assessment function, the government debt could eventually expand to a level beyond the taxpayers’ funding capacity.”
Prime Minister Naoto Kan has pledged 4 trillion yen in spending to help rebuild areas devastated by the temblor. Some lawmakers have called on the central bank to finance further stimulus packages by underwriting debt, reducing pressure on Japan’s debt burden, which is already the largest in the industrialized world.
At the April 28 meeting, BOJ board members cut their forecasts for this fiscal year’s GDP to 0.6 percent from a January estimate of 1.6 percent while they raised predictions for consumer prices excluding fresh food to a 0.7 percent increase from a 0.3 percent gain. The board will review those forecasts in July.
To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net;
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net
Rate this Page