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Japan firms see economy stalled, want Abe to focus on growth: Reuters poll
December 8, 2014 / 11:18 PM / 3 years ago

Japan firms see economy stalled, want Abe to focus on growth: Reuters poll

TOKYO (Reuters) - Japanese companies want Prime Minister Shinzo Abe to do more to boost growth, including steps like income tax cuts, as most think the economy is stalled or in recession after an April sales tax hike, a Reuters poll showed.

Japan's Prime Minister Shinzo Abe, who is also leader of the ruling Liberal Democratic Party (LDP), speaks to voters during a campaign for the Dec. 14 lower house election, in Tokyo, December 7, 2014. REUTERS/Yuya Shino

Coming ahead of a general election on Sunday in which Abe is seeking a fresh mandate for his reflationary policies, the survey results show strong support for his recent decision to put off a further planned increase to the sales tax by 18 months.

If he is re-elected - and polls have predicted a landslide victory - around half of firms want Abe to prioritise cuts to the corporate tax rate - which at around 35 percent is one of the world’s highest - as well as other growth strategies such as structural reform.

Another 23 percent said they were keen to see measures to boost consumer spending such as income tax cuts, while only 19 percent said the government should prioritise fiscal reform that would tackle the country’s ballooning debt.

“The government must put the economy back on track for growth, otherwise the decision to delay the tax hike will become meaningless,” wrote an executive from a transportation firm.

The Reuters Corporate Survey, conducted between Nov. 25 and Dec. 3, also provided a more-up-to-date take on the state of the economy after GDP data showed it shrank for a second straight quarter in July-September.

Some 55 percent of companies said the economy is at a standstill and 14 percent said it is in recession. The remainder agreed with government and central bank view that the economy is improving, with 23 percent describing it as picking up and 8 percent saying it was doing well.

Managers respond to the poll on condition of anonymity. The survey, which is conducted for Reuters by Nikkei Research, polled 486 firms and around 250 answered the questions on the economy and policy preferences.


The decision to delay an additional sales tax hike to 10 percent from 8 percent until April 2017 drew support from 72 percent of Japanese firms. The survey was mostly completed before Moody’s Investors Service last week downgraded Japan’s sovereign debt rating by one notch to A1, saying the tax hike delay made it more difficult for the world’s third-biggest economy to meet its debt reduction goals. [ID:nL3N0TL322]

There were, however, far fewer plaudits for the central bank’s Oct. 31 shock expansion of its asset buying programme - a move the bank said was necessary to defeat deflation, and which has since helped pushed the yen down some 10 percent to seven-year lows against the dollar.

Sixty-three percent of firms said the move would not have an effect on business, while a quarter said it would have a positive impact and the remaining 12 percent said it would have a bad impact.

Of those that saw a positive impact, managers at car, electronics and other exporters said the weaker yen would make exports more competitive and inflate profits garnered abroad when they are brought back home.

Contrary to widely held views that such monetary easing boosts asset prices without helping the overall economy, some real estate firms said the move would help lower borrowing costs, while a number of others, particularly those in the machinery sector, saw a boost to capital spending.

But retailers, transport and paper firms lamented the further slide in the yen, saying the price of the raw materials and fuel had climbed too far.

Japan Inc was also very critical of Abe’s decision to call an election two years earlier than needed. More than three-quarters expressed their disapproval, with many calling it unnecessary and a waste of money the country can ill afford.

Reporting by Tetsushi Kajimoto; Editing by William Mallard and Edwina Gibbs

Our Standards:The Thomson Reuters Trust Principles.
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