Recent policy decisions taken by the Japanese government and central bank have had little impact on markets, according to AllianceBernstein, but there may yet be hope.
Commenting on both the Bank of Japan’s monetary policy meeting and Japanese prime minister Shinzō Abe’s fiscal stimulus package, AllianceBernstein senior economist Guy Bruten noted that both “came and went, leaving behind the bitter taste of disappointment”.
“After a plethora of leaks, newspaper speculation and other commentaries, the cabinet approval of a fiscal package exceeding ¥28 trillion, containing substantial genuine fiscal stimulus, was perceived as falling well short of what’s required,” he said.
According to Mr Bruten, there is a chance investors face a “real risk of missing the wood for the trees” in this situation since the effect of these events was minimal and the country’s economic position “hasn’t really changed that much”.
He went on to say, however, that while these measures appear to have missed the mark, “the scale and scope of fiscal stimulus, facilitated by a central bank easing, will be large enough to have a meaningful macroeconomic impact”, and investor disappointment may be unwarranted.
“The end game here is higher inflation, to prove the success of Abenomics, to manage the process of public sector deleveraging” he said.
“There’s certainly no guarantee of success, but a number of boxes have been ticked—a sizable fiscal expansion, against the backdrop of a fully employed economy, and a compromised central bank involved in the process”.
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