Japan's Prime Minister Shinzo Abe must prioritize regulatory reforms,
according to economists in a monthly poll whose predictions show they
remain negative on prospects for the rate of inflation to advance in
coming years. After shifting his cabinet last week in an effort to save
him from declining public support, Abe reported the economy is still at
the top of his priority list. He reiterated that he would look to engineer a
optimistic cycle of higher corporate profits, wages and prices.
The new cabinet lineup, announced following a series of mistakes and
missteps by Abe's government, gave a boost to his support. Though
Japan is still dealing with prospects of lagging economic growth and no
significant increase in inflation.
In the poll, Japan's economy is predicted to grow by 1.4 percent in this
fiscal year, which ends in March 2018, and only 1.1 percent next. Core
inflation is seen averaging 0.6 percent this year and 0.8 percent next,
well short of the Bank of Japan's 2 percent target.
"Bold deregulation, which is a part of (Abe's) growth strategy, has not
progressed much and the government needs to work on that," stated
Takumi Tsunoda, senior economist at Shinkin Central Bank.
"To encourage liquidity in the labor market is an important policy,
which could support the potential growth rate and also would help raise
wages," he added.
Out of the 31 economists who answered an additional question on what
Abe should do to regain public trust, 18 responded he should focus on
Amid those respondents, 11 added a need to reform to Japan's
restrictive labor market, while six reported the government should
prioritize reforms in the medical and elderly care system. One said Abe
should introduce better technology and artificial intelligence to
In the poll, 31 out of 35 analysts predict the Bank of Japan's next move
will be to start to ease its ultra-easy monetary policy. Four said the BOJ
will adopt more easing measures.
With inflation at just 0.4 percent, the BOJ in July for a sixth time
retracted the timeframe for reaching its 2 percent target. It now
anticipates inflation will not reach that level until sometime in the fiscal
year ending March 2020.
"When the underlying CPI … and medium-term inflation expectations
rise above 1 percent, we expect the BOJ will raise the 10-year yield
target for the first time," quoted Hiroshi Ugai, chief economist at JP
"Since the BOJ focuses on upward momentum of inflation, we do not
expect the BOJ will ease monetary policy even if the rising pace of
inflation is far behind the BOJ's outlook."