Japan economic outlook dwindling, BoJ needs to take action

After diving deeper into recession, what’s next for the Japanese economy? Watch today’s discussion on Japan, and why there is a need for further BoJ action, by Darren Sinden, Market Commentator for Admiral Markets.

BoJ MPC meet ahead: More QE?

Sinden highlights the key event ahead for the Japanese market – the Bank of Japan MPC meeting on Thursday. On this, he questions whether the Japanese central bank will expand its QE program once again, with the economy slipping back into recession territory.

Three years of QE and no change in Japan’s economic growth

Sinden notes that the there has been no tangible improvement in the economic growth of Japan despite the three years of balance sheet expansion programme of the BoJ.

Highlighting a chart on the balancesheet and the GDP growth rate, Sinden shows how the growth has only declined over the past few years, suggesting a possible structural stagnation in the economy.

Sinden further shares that the BoJ’s balancesheet has more than doubled since 2012 when the ‘3 arrows’ policy was introduced. BoJ has went on to become the largest holder of government debt, and Japan’s GDP-debt ratio had climbed to around 246% by end of October.

Japan: GDP and Inflation are heading the wrong way

Sinden compares the Japanese inflation and GDP data over the past few years and infers that after having some initial success in pushing inflation higher via the sales tax, inflation reverted to trend in mid 2014 only to fall sharply lower.

Adding to concern, Sinden notes that the lack of GDP growth in Japan has continues at a time when the economy is enjoying lower energy import prices.

Japan exports declining despite a weaker Yen

Sinden shows the chart for Japanese export growth, noting that that while the weak Yen helped to growth the country’s exports, the overall export growth is declining over 2015.