Japanese struggles

The End of `Made in Japan'? - Bloomberg View: "A huge drop in machinery orders -- the biggest on record -- is yet another reminder Japanese executives remain reluctant to invest their massive cash reserves or raise wages. Even more ominously, M2 money supply growth is now in negative territory. Such measures should be surging 14 months after the Bank of Japan unleashed history's biggest monetary bonanza. Instead the tepid 3 percent rise in M2 last month put Japan's money supply in the red in real terms, a clear sign BOJ Governor Haruhiko Kuroda's bond-buying spree has lost potency.

"The reality is this: so far, the spending retrenchment in April-May tracks fairly closely the retrenchment seen in 1997," says Richard Katz, publisher of the New York-based Oriental Economist Report.

Economists are clamoring for another jolt of monetary audacity after Prime Minister Shinzo Abe's ill-advised sales tax increase in April. Clearly, the sugar high from the BOJ’s April 2013 move to double bond purchases has worn off. Yet the BOJ is expected to keep policy unchanged at its July 14-15 meeting.

"The BOJ's inaction risks turning the quantitative-easing program from a qualified success into a failure," says Adam Slater, senior economist at Oxford Economics in London. "Now, the danger is increasing that this will instead be a tardy response to a significant deterioration in economic conditions.""



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