TOKYO (Reuters) – A vast majority of Japanese firms want fiscal support to keep flowing at least through this year, a Reuters poll showed, while two-thirds want help to ease the pain from rising commodity prices and a weaker yen.
The results of the Reuters Corporate Survey show companies in the world’s third-largest economy feeling the need for further support, even as major economies from Europe to the United States dial back crisis-mode economic stimulus programmes.
The survey also highlights how the weak yen and rising commodity costs are putting the squeeze on Japanese companies already saddled with slow growth and an ageing domestic population.
“Excessive yen weakening will boost import costs, driving up the prices of crude oil and raw materials further,” the manager of a ceramics maker wrote in the survey, contributing on condition of anonymity.
Others called for measures to cope with rising oil prices and prevent a weaker yen, as rapid price hikes could more than offset effects of stimulus packages rolled out over the past two years.
Nearly 80% of Japanese firms said expansionary fiscal policies should continue, the survey found. The monthly poll, conducted Dec. 22-Jan. 7, canvassed 502 large and mid-sized non-financial firms.
A total of 61% said the stimulus should continue through this year and another 18% said they wanted it in place through 2023 or beyond. Some 17% said it should end immediately.
Although Japan has fared far better than most other advanced countries in terms of COVID-19 infections and deaths while avoiding debilitating lockdowns, on Sunday the government reintroduced stricter measures in three regions, taking such action for the first time since September due to the spread of the Omicron variant.
“Fiscal discipline is important but economic recovery and stability in people’s livelihoods should take priority,” a manager of a wholesaler wrote in the survey.
Another manager, at a different ceramics maker, wrote that fiscal policy must remain expansionary until business picks up at non-manufacturers, illustrating a clear recovery trend.
Many firms backed Prime Minister Fumio Kishida’s stance that prioritises economic recovery in the short term.
As a result, a vast majority of companies saw it “impossible” for the government to reach Kishida’s target of bringing about a primary budget surplus by the 2025 fiscal year.
Most private-sector economists see the target as a tall order, given a huge cost of stimulus that has strained the industrial world’s heaviest debt burden, more than twice the size of its economy.
Deterioration in Japan’s fiscal position could eventually stoke concern about currency depreciation and runaway inflation.
But for now, the outlook for inflation was evenly divided in the survey – one third of firms saw the current commodity-driven inflation lasting through the first or second quarter, while another third expected it to stay through the second half.
The rest saw prices continuing to rise next year or beyond.
($1 = 115.3000 yen)
(Reporting by Tetsushi Kajimoto; Editing by David Dolan and Kenneth Maxwell)