Invesco Perpetual’s head of Japanese equities, Paul Chesson, remarks: “The BoJ’s chances of success may now be better with a complementary fiscal policy from the Abe government, but with core inflation currently negative, the BoJ’s target remains a distant prospect.
“Economic data continues to reflect an uneven trend and any sustainable improvement will depend as much on global conditions as on Japan’s domestic policy.”
The macroeconomic environment has been held back by a stronger yen, impacting exports mostly.
Other economic data has been lagging though, with Michael Stanes, investment director at Heartwood Investment Management, pointing to tight labour market conditions and household spending being kept in check by limited wage growth.
What does Japan need to do in order to find its way out of this economic quagmire?
Mr Stanes concludes: “A fundamental change to the economy will probably require significant government action, but it remains to be seen whether prime minister Abe’s government has the wherewithal to effect such change; the evidence so far has been underwhelming.”
Ellie Duncan is deputy features editor at Investment Adviser
