Abenomics describes the plans of Japanese Prime Minister Shinzo Abe to revive growth in the world’s third largest economy, which is struggling to find traction under the impact of a strong yen and stubborn deflation.
Bank of Japan struggling to meet inflation target, analysts say
Stronger steps needed to revive Japan's economy, with the Abenomics policies of the prime minister yet to produce clear results, analysts say
Bloomberg in Tokyo
Half a year after Bank of Japan governor Haruhiko Kuroda unleashed record monetary easing, economists see the central bank failing to meet its inflation target, underscoring the case for stronger measures to revive the economy.
While the median estimate of BOJ board members released last week showed the bank expects consumer prices to rise 1.9 per cent in the 2015 fiscal year - in line with its goal of 2 per cent in two years laid out in April - just two of 34 analysts surveyed see the target met in that timeframe.
With the bank seen standing pat on the pace of asset purchases until it can assess the impact of a sales tax increase in April next year, the onus is now on the government to sustain confidence in the Abenomics project.
Prime Minister Shinzo Abe has yet to introduce legislation such as corporate tax cuts that companies have advocated to boost Japan's potential.
"Progress on the growth strategy has been slow," said Yuichi Kodama, the chief economist at Meiji Yasuda Life Insurance. "If the delays continue, foreign investors could lose confidence in Abenomics, and stocks could fall."
The benchmark Topix stock index - still the best performer among 24 developed markets this year in the aftermath of Kuroda's easing and a tumble in the yen that made exporters more competitive - trailed counterparts last month, signalling waning enthusiasm with Abenomics. The index rose less than 0.1 per cent.
Fifteen of the economists surveyed said the lack of bolder steps on the growth strategy was undermining the central bank's reflation campaign.
Growth slowed to an annualised 2.1 per cent in the three months to September from 3.8 per cent in the previous quarter, Nomura Securities estimated.
BNP Paribas said the expansion was likely to have fallen to 1.7 per cent.
Abe said the current extraordinary parliamentary session would be one for "getting things done", reflecting a focus on pushing through legislation for his growth strategy - the "third arrow" of his Abenomics project.
On the table are steps to encourage corporate restructuring to boost industrial competitiveness and the introduction of zones for deregulation in fields from medical treatment to urban development.
The cabinet yesterday approved the special zone bill, Economy Minister Akira Amari said.
The yen's 12 per cent slide against the US dollar this year has induced nascent inflation by boosting import costs. Yet price gains are far from the central bank's target with core prices excluding fresh food, the central bank's key gauge, rising 0.7 per cent in September from a year earlier.
Regular wages excluding overtime and bonuses fell for a 16th straight month in September, showing the potential squeeze on households should inflation become embedded.
The rise of three percentage points in the sales tax next year is set to cause an annualised 4 per cent contraction in the second quarter even as Abe prepares 5 trillion yen (HK$393 billion) in stimulus to cushion the blow.