"Abenomics" lifts Japan business mood, households' inflation expectations

Mon Apr 1, 2013 6:08am EDT
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By Leika Kihara and Kaori Kaneko

TOKYO (Reuters) - Japanese business sentiment improved in the first three months of 2013 and households' inflation expectations hit a 4-1/2 year high, central bank surveys showed, suggesting that Prime Minister Shinzo Abe's determined push for monetary stimulus is thawing Japan's long-held perceptions of intractable deflation.

The surveys - the first since Abe took office in December - will help new Bank of Japan Governor Haruhiko Kuroda argue for bold, experimental steps to boost sentiment when he chairs his first policy-setting meeting later this week.

The mood at big Japanese manufacturers improved in the three months of this year after deteriorating for two straight quarters, according to the central bank's closely watched quarterly "tankan" survey for March.

A separate BOJ survey showed nearly three-quarters of households expect prices to rise a year from now, the highest ratio since 2008, suggesting that expectations of aggressive stimulus are translating into inflation expectations.

The surveys, released on Monday, come ahead of a BOJ policy meeting that is expected to start pulling out all the stops to push up prices, initially by buying longer-dated bonds and setting a new target focusing on the size of its balance sheet. The two-day meeting ends on Thursday.

"The governor is expected to make good on his promise of pursuing bold monetary easing," said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

"The tankan result reflected companies' expectations that a weaker yen and policy steps pursued by the government will have a positive impact on the economy," he said.

Abe's ambitious push for hefty stimulus spending and monetary easing by the central bank - dubbed "Abenomics" - has offered some relief to the export-reliant economy by helping to weaken the yen and bolster share prices.   Continued...

A man walks out from a business building in Tokyo January 24, 2013. REUTERS/Toru Hanai