The Japanese economy in the second quarter wedge – The World

New setback for “abenomics”. The announcement Monday, August 15, with a gross domestic product growth (GDP) anywhere in Japan in the second quarter (and 0.2% year on year), questions once again about the effectiveness of the policy economic government of Shinzo Abe, a mixture of stimulus, monetary easing and, to a lesser extent, structural reforms

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GDP growth is below expectations of economists polled by Reuters, who had forecast an increase of 0.7% year on year. In the first quarter, it reached 0.5% (+ 2% yoy). In the second, the third largest economy in the world has suffered a near stagnation of household consumption (+ 0.1% after + 0.7% in the first quarter).

limits of monetary policy

in a global context marked by uncertainty about the consequences of Brexit and the slowdown in emerging economies, exports were down 1.5% and business investment in 0.4%. “The weakness of [it] reflects the cautious Japanese companies” , regretted the minister of economic revitalization, Nobuteru Ishihara.

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Despite the disappointing results, the Minister believes however that “the trend towards moderate recovery continues. “ the rebound in industrial production in June (+ 2.3%) brings water to his moulin.M. Ishihara expected positive impact of the recovery plan announced on August 2 and has 28 100 billion yen (249 billion euros). It should translate through massive investments in infrastructure and the distribution of 15,000 yen in cash to each of the 22 million of the smaller Japanese

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at the announcement of the stagnation of GDP, Finance Minister Taro Aso himself has called for structural reforms to improve productivity. On the stock market on Monday at the end of trading, the Nikkei index of 225 blue chips yielded 0.30% (- 50.36 points), to 16 869.56 Points

reaction. Aso comes as monetary policy, which is another component of abenomics, seems to reach its limits. However modest, the decision taken on 29 July by the Bank of Japan (BoJ) to double to 6,000 billion yen its investments in exchange traded funds (ETF) fears distortions in financial markets.

the choice made in January by the Bank of Japan to move towards the unhappy negative rates of more and more banks

the Institute of emission conducts its purchases afternoon when the morning session ended down. He did it on 4 August and the Nikkei, which fell by 0.24% in the morning, closed up 1.07%. These operations would attract foreign investors for short-term investments, but discourage those geared towards long-term investments, such as US pension funds. The proportion of fund managers who hold the majority of Japanese equities rose in July, its lowest level in three and a half years, according to calculations by Bank of America Merrill Lynch.

At the same time the choice made in January by the BoJ to move towards the unhappy negative rates of more and more banks. A study by the Japanese Financial Services Agency (FSA) published Saturday, August 13, the measure would reduce the profits of 300 billion yen for banks in the current year. Large institutions now are reluctant to participate in the auctions of Japanese treasuries. They are mainly purchased by the BOJ, which has now more than 34% of Japanese debt.

Deflation

In addition, the negative rate were intended to increase lending to enterprises. But in July, the outstanding loans of major Japanese banks fell 0.7% to 186,800 billion yen. This is the first contraction in forty-five months.

The National Bank has promised for September an assessment of the effectiveness of decisions already taken. New easing measures may be decided, but few analysts still believe in the ability of the BoJ to reach its goal of 2% inflation. Prices fell 0.4% in June, for the fourth consecutive month.

These developments raise concerns an appeal to the “helicopter money” or monetizing the debt. The government there would not be hostile, but the BoJ Governor Haruhiko Kuroda, has repeatedly reminded that such a policy would be contrary to the law.