An increasing number of Japanese retail investors are predicting flat growth or recession for the economy over the next 12 months, a survey showed on Friday. The survey by Goldman Sachs Asset Management provided the latest evidence that Prime Minister Shinzo Abe's unprecedented stimulus to revive the economy is failing to win investors' confidence.
Data released on Monday showed the world's third largest economy slid into recession for the second time in a year, as companies cut back on investment due to caution over the global and domestic outlook. According to the survey, 36.5 percent of the respondents also believed that the economy will slip back into deflation, up from 27 percent in a similar poll conducted last year. Such pessimism would be a blow to Abe and Bank of Japan Governor Haruhiko Kuroda, who has vowed to reflate the economy by lifting inflation expectations to encourage consumers to spend more.
So-called "Abenomics" policies - which relies heavily on massive fiscal and monetary stimulus - have helped to boost Japan's Topix stock index to eight-year highs and weaken the yen to 13-year lows. But the impact on the real economy has been limited. The economy contracted in the July-September quarter, with capital spending falling 1.3 percent as companies held back on investing.
The BoJ's quarterly tankan survey of business in September showed companies expected capital spending to rise 6.4 percent in the fiscal year to March, but analysts said any sharp recovery in the coming quarter was unlikely. "A lack of growth expectations for the domestic market is the major drag on capex, due in part to declining population," said Kiichi Murashima, economist at Citigroup Global Markets Japan.
"External factors will probably cause capex to undershoot plans more than in an average year, so I think capex will hardly contribute to growth in the coming quarters." Just under half of the about 1,000 wealthy individual investors polled in the Goldman survey expected Japan's economy to post growth over the next 12 months, down from 62 percent in previous survey.
"Abenomics has failed," Steen Jacobsen, chief investment officer at Copenhagen-based Saxo Bank, told Reuters in an interview in Tokyo earlier this week. Jacobsen said while a weak yen has benefited exporters, the higher cost of imports has hurt the average consumer. "The young generation has less money at its disposal. They have been priced out of having an apartment, having a car, and have less ability to go overseas."