By James Saft
(Reuters) – Japan’s bold Abenomics plan is producing spluttering results on key consumption and investment measures, potentially undermining its resolve.
Japan’s economy grew by just 0.3 percent in the fourth quarter, less than half estimates. That’s despite Japan and its central bank following through strongly on a massive campaign of asset purchases which is on course to double the amount of money sloshing around the economy in the 20 months to the end of 2014. The Bank of Japan on Tuesday kept policy steady but increased a smaller lending program.
That buying, or money creation binge, has been successful on some fronts: creating the best growth in more than three years and lifting prices decisively.
Japan’s consumers and its companies, however, have failed to follow through on their end of a bargain which would create self-sustaining growth and rising prices in Japan.
Put simply, consumers are not spending enough and companies, despite a cheap yen and favorable conditions for exports, seem generally uninterested in making big capital investments to expand.