Japan data sidelined by NPL, anti-deflation, BoJ policy announcements
Japanese data this week will be sidelined by concerns over the release of policy announcements on Wednesday covering plans to speed up non-performing loan resolution and implement anti-deflation measures.
The Bank of Japan will also announce its policy decision on the same day, with analysts divided on the possibility of action here.
The Nihon Keizai newspaper reported that the central bank is considering implementing additional monetary easing steps, including raising outright purchases of long-term government bonds by as much as 400-500 billion yen.
However, BoJ governor Masaru Hayami told AFX-Asia that the central bank has already done enough for monetary conditions with the existing policy of providing 'ample liquidity' into the financial system.
The bad-loan plan, created by financial services minister Heizo Takenaka, has already been delayed twice.
"The previous two weeks began with expectations of a bad loan package that has not appeared. If nothing is announced in the next week, then it looks like Takenaka has lost," said Richard Jerram, chief economist at ING Securities.
"This is a particularly unpredictable political situation, because the room for compromise on the issue of bank recapitalisation looks minimal," he said.
"The BoJ meeting is on the same day Takenaka's package is due. It will be hard for the BoJ to ease policy on the promise of reform, but we expect further moves if (the government) delivers," he said.
Shuji Shirota of Dresdner Kleinwort Wasserstein is more confident of a possible shift in monetary policy.
"At the Bank of Japan's Monetary Policy Meeting ... we believe that members will have no choice but to consider additional easing measures," he said.
"Provided that they limit the period of such operations to one year, the bank has the capacity to increase JGB purchasing operations to just less than 1.6 trillon yen per month (from 1 trln at present)," he said.
Jerram said the focus for data will be industrial output on Tuesday.
"The data focus is on the industrial production figure and whether there was a rise in inventories in September," he said.
"Exports have been the driver behind industrial production growth, so if exports are starting to stall, this should soon hurt output as well. Rising inventories would be a likely first sign of this," he added.
However, UBS Warburg analyst Ayako Mitsui noted the lack of change in the trend of unemployment, despite worsening production conditions.
"We believe it's too early for manufacturers to adjust their employment and the number of bankruptcies was well tamed. However, we see risks of higher rate toward the end of year," she said.
"Private consumption has remained quite firm relative to incomes. According to retail data, we could confirm only a marginal slowdown in September although cash earning declined," she added.
The following lists the range of forecasts given by surveyed economists for key economic indicators to be released this week (compared with previous period data or previous estimate):
JAPAN SEPT RETAIL SALES, Monday (8:50 am):
- down 0.5-3.5% yr-on-yr (down 2.1)
JAPAN SEPT SALARIED HOUSEHOLD SPENDING, Tuesday (8:30 am):
- up 1.0-down 2.1% yr-on-yr (down 0.3; consensus down 0.6)
JAPAN SEPT UNEMPLOYMENT, Tuesday (8:30 am):
- 5.4-5.5% (5.4; consensus 5.5)
JAPAN SEPT INDUSTRIAL OUTPUT, Tuesday (8:50 am):
- up 0.4-down 2.0% month-on-month (up 1.4; consensus down 0.4)
- up 3.4-6.4% yr-on-yr (up 1.8; consensus up 4.9)
