Japan’s consumer confidence
According to a report by the Cabinet Office, Japan’s consumer confidence index fell to 41.3 in July 2016, compared to 41.8 in June 2016. It didn’t meet Market expectations of 42.2. The fall in consumer confidence indicates that the economy will experience further contraction.
Income growth, willingness to buy consumer durable goods, and employment fell in Japan’s economy. Further, the deflationary situation is continuing in Japan. The Bank of Japan is receiving pressure from the Japanese government to take some steps to expand the monetary stimulus program in the economy (DXJ) (EWJ).
Government and the Bank of Japan
The government wants to increase the fiscal stimulus to accelerate the economy. On Wednesday, July 27, 2016, Prime Minister Shinzo Abe announced a stimulus package of 28 trillion yen ($266 billion). However, many Bank of Japan policymakers believe it won’t boost inflation.
The Bank of Japan recently announced at its monetary policy meeting in July 2016 that it will increase the ETF (ETF) purchase program to an annual pace of 6 trillion yen from 3.3 trillion yen to provide stimulus to the economy. The Bank of Japan’s major concern is a stronger yen (FXY), which is affecting Japan’s export business. The yen is becoming stronger against the US dollar (UUP) day by day. If the Bank of Japan takes necessary action to control the movement of the yen, then we may see changes in sentiment in Japan’s economy.
In the next part of this series, we’ll see which indicators investors should look at this week.