Chimneys of a factory are reflected in a traffic mirror at the Keihin industrial zone in Kawasaki, south of Tokyo, Japan, August 18, 2016. Picture taken on August 18, 2016. REUTERS/Kim Kyung-Hoon

By Tetsushi Kajimoto

TOKYO (Reuters) – Japanese companies overwhelmingly say the government’s latest stimulus will do little to boost the economy and the Bank of Japan should not ease further, a Reuters poll showed, a setback for policymakers’ efforts to overcome deflation and stagnation.

Prime Minister Shinzo Abe this month unveiled a 13.5 trillion yen fiscal package of public works projects and other measures, vowing a united front with the BOJ to revive the economy and raising speculation of a surge in government spending essentially financed by the central bank.

Cranes at a construction site are pictured in Tokyo, Japan, August  21, 2016. REUTERS/Kim Kyung-Hoon
Cranes at a construction site are pictured in Tokyo, Japan, August 21, 2016. REUTERS/Kim Kyung-Hoon

But less than 5% of companies believe the steps will boost the economy near-term or raise its growth potential, according to the Reuters Corporate Survey, conducted August 1-16.

“It’s disappointing that the stimulus focuses on public works, and it lacks attention to promoting industry and technology that would lead to future growth,” said a manager at a precision-machinery maker.

Abe took office 3 1/2 years ago, pledging to reboot the economy with aggressive monetary stimulus, fiscal spending and reform plans. After an early spurt of growth and surging corporate profits, helped by a sharp fall in the yen, the economy is again sputtering and prices are slipping, underscoring the challenge for Japan to beat nearly two decades of deflation and anaemic growth.

“Unless drastic steps are taken to fix the root of Japan’s problems – the falling birthrate and working population – solid economic growth won’t return … only public debt would pile up without sustainable growth,” said an electrical machinery firm.

At the same time, 63% urged the government to expand fiscal support for new technology such as the Internet of Things, and artificial intelligence.

Companies voiced concerns about an uncertain outlook for consumer spending and the broader economy, urging Abe to accelerate structural reforms, the “third arrow” of his “Abenomics” programme, which many economists say has been neglected.

The survey, conducted monthly for Reuters by Nikkei Research, polled 533 big and medium-sized firms, with managers responding anonymously. Around 260 companies responded.


Corporate Japan was also cautious about fresh monetary stimulus, with over 60% saying the BOJ should not ease further or should even start to wind down its massive stimulus. The combination of the central bank’s heavy buying of government debt with increased fiscal spending has led to criticism that Japan is essentially engaging in “helicopter money” – the practise of a central bank underwriting profligate spending.

“Helicopter money must be avoided,” said a general machinery firm.

The Corporate Survey was taken just as Abe announced the economic stimulus earlier this month, and comes on the heels of data last week that showed the world’s third-largest economy stalled in the second quarter.

The BOJ embarked on unprecedented easing more than three years ago but its adoption of negative interest rates this year – in which commercial banks are charged to park excess funds with the central bank – has drawn criticism from banks for squeezing their profits.

With prices still sliding despite three years of aggressive asset purchases, the BOJ’s policy review in September could put up for debate its target for expanding Japan’s money supply, sources say.

“Many companies appear to want the government to shift focus away from fiscal stimulus to structural reform and deregulation, while feeling monetary policy has hit limits,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

(Reporting by Tetsushi Kajimoto; Editing by William Mallard, Malcolm Foster & Shri Navaratnam)

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