Japan keeps warning on market volatility, raises view on capex in report

8:07 pm Monday, October 24th, 2022

By Kantaro Komiya

TOKYO (Reuters) – Japan reiterated a warning that “full attention” should be paid to market volatility in its monthly economic report published on Tuesday, following the government’s repeated market interventions in the wake of the yen’s slide to a 32-year low.

With a yen-buying operation last week estimated at a record 5.5 trillion yen ($36.95 billion), and another suspected intervention on Monday, Japan has been attempting to stem the currency’s depreciation that has jacked up costs of imported goods for households and businesses.

The October economic report kept the overall assessment of the economy unchanged for a fourth month, saying it was in a moderate recovery, though it raised its view on business spending while downgrading its assessment of imports.

The government also maintained a reference to the need to “pay full attention to the impact of financial and capital market fluctuations,” a warning it added in the September report.

The line “mainly refers to currency exchange trends, but is also meant to warn against heightened volatility in general in other markets including stocks and interest rate moves,” a Cabinet Office official told reporters ahead of the release of the report.

Authorities raised their view on capital expenditure for the first time since February, given robust spending plans shown in the Bank of Japan’s (BOJ) quarterly business survey earlier this month.

The assessment on imports, meanwhile, was lowered on a shrinking shipment volume from China and other Asian trade partners, even the yen-denominated import value hit a record in September.

On private consumption, which accounts for more than half of Japanese gross domestic product, the government kept its view that it was moderately picking up. Service spending was rising, but consumer sentiment has tumbled due to inflation, especially among low-income earners, the official said.

To support Japan’s fragile pandemic recovery and amid falling public approval rates, Prime Minister Fumio Kishida’s government is set to release an economic stimulus package on Friday worth over 20 trillion yen.

Despite the abrupt resignation of Daishiro Yamagiwa, the minister in charge of economic revitalisation, the stimulus package will be announced by end-October as planned, Kishida said on Monday.

The BOJ is expected to keep ultra-low interest rates steady to support the economy in the policy meeting concluding on Friday, even at the cost of accelerating a fall in the yen.

($1 = 148.8400 yen)

(Reporting by Kantaro Komiya; Editing by David Holmes)