Figures due on Monday in Tokyo are projected to show that Japan, the world’s third-largest economy shrank at an annualised rate of 1.9% in the second quarter.
The well-documented slowdown of the Chinese economy and its impact on surrounding Asian neighbours has also increased the likelihood that any rebound in growth in the reporting period of July to September will be unexceptional.
This was of course before the Yuan devaluation of the previous few days, which may also have a diluting affect on the next quarter’s numbers.
The insipid numbers could also regenerate market expectations that the Bank of Japan will once again look to expand monetary stimulus to buttress the economy, though many central bankers remain wary of acting any time soon perhaps waiting to see how the US Fed moves in September.
With Abe’s popularity plunging in recent polls following his recent self defence legislation push, the restarting of Nuclear power stations and the Olympic stadium redesign political factors may discourage the BOJ from expanding its already massive asset buying stimulus program.
Abe’s close advisors have indicated that further easing is undesirable as it could spur further falls in the yen, which would boost import prices and the cost of living for domestic households.
The Japanese economy suffered a minor recession last year with consumer consumption suffering more than predicted after the sales tax hike in April 2014. Growth has returned this year, only to slow again as exports and consumption remained disappointingly weak.
