Goshi Hosono, secretary general of Japan’s biggest opposition party, challenged the government to better protect the elderly and small companies, charging Prime Minister Shinzo Abe’s policies with ignoring the risks of monetary easing and a weakened currency.
“It’s a fact that monetary easing and a weaker yen improved the mood, but there are also side effects and risks,” the Democratic Party of Japan’s Hosono said yesterday on public broadcaster NHK’s Sunday Debate program. “The government hasn’t taken sufficient care regarding the increased burden on pensioners and small business from rising import prices.”
Polls show voter support for policies that have helped drive benchmark stocks to five-year highs this year. The Topix index closed last week 54 percent above the level of mid-November, when Abe pledged to revive growth by targeting 2 percent inflation. Japan’s economy expanded the most in a year in the first quarter as pledges for monetary easing weakened the yen and boosted shares, supporting exports and consumer spending.
Thirty-five percent of respondents in an April 23 Mainichi newspaper poll cited the economy as the most important issue in parliamentary elections scheduled next month. Abe, whose first, 12-month stint as premier ended in 2007 due to ill health, is supported by 74 percent of the electorate, according to a Yomiuri newspaper poll published April 16.
Japanese shares entered a correction last week. The Topix was down 2.7 percent as of 2:25 p.m. in Tokyo and has lost more than 10 percent from May 22 highs as the yen gained value. Abe said today he expected communication from the Bank of Japan to calm the markets.
“All the figures improved in April: employment, consumption and production,” he said at a press conference in Yokohama, Japan. “Our policies are gradually beginning to bear fruit and we should be more confident.”
Reversals in Japan’s stock rally coincided with a jump in government bond yields as the central bank attempts to stoke inflation in a nation with 15 years of entrenched consumer-price declines. Along with monetary and fiscal stimulus, Abe plans a structural reform package to be unveiled this month.
The International Monetary Fund last week endorsed Abe’s policies and the Bank of Japan’s monetary easing, saying that a slide in the yen is “not problematic” provided the government rolls out a “complete package” of fiscal and structural reforms. Abe and BOJ Governor Haruhiko Kuroda can achieve 2 percent inflation in the near to medium term so long as additional measures complement BOJ easing, according to the IMF.
Abe’s revival campaign got further support May 31 from data showing Japan’s industrial production rose 1.7 percent in April, exceeding the highest estimate in a Bloomberg News survey. The pace quickened from 0.9 percent the previous month, a Trade Ministry report showed.