Japanese PM Says This is a Year of Challenge

Facing head winds for his campaign promise to achieve 2% inflation and revive economic vitality, Prime Minister Shinzo Abe said Monday this is “a year of challenge” toward his new target of boosting the economy and supporting child rearing and care-giving.

“Challenge, challenge, challenge, it is going to be a year of challenge,” he told reporters.

Abe led his Liberal Democratic Party to a return to power in a landslide win in late 2012 Lower House elections with the promise to “regain Japan” by correcting the high yen, overcoming deflation and conducting more assertive diplomacy.

So far, Abe’s combination of aggressive monetary easing and increased fiscal spending has failed to lift inflation to the desired 2% from near zero. A major policy tool – deregulation and economic structural reform – is yet to take shape and thus has had little impact on the growth potential which is estimated to be close to zero.

The Prime Minister repeated his earlier remarks that while firms have created more jobs and investing in equipment, Japan has not yet moved out of years of price drops. He said the government is bringing forward its plan to lower corporate taxes to a level below 30% so companies would have more cash to raise wages, a key to raising inflation.

“We are almost there,” he said. “Bank of Japan Governor Kuroda has said (the bank) will do anything it can do (to achieve its 2% inflation target). The government and the BOJ are united as one and fully committed to overcoming deflation.”

Asked what numerical targets he has for Upper House elections around July, Abe repeated his administration’s new policy targets of raising the nominal GDP to Y600 trillion from the current Y490 trillion; pushing up the fertility rate to 1.8 from 1.4; and allowing people to stay on the job while giving care to their family members.

“Nothing cannot be done without challenging. We want to start the challenge with this Diet session,” he said.

The parliament begins its 150-day ordinary session Monday. The government wishes to win swift approval of its supplementary budget for the current fiscal year first before the Diet debates the budget for fiscal 2016 that starts on April 1.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza