Shinzo Abe’s approval rating dropped to near historical lows of 40% following the passage of a security bill Sept. 20, likely to undermine the so-called “Abenomics” economic program, Pioneer said in the research note.
Japan’s Q2 GDP declined 1.2% quarter-on-quarter, with household consumption down 2.7% and capital expenditure down 3.6%. Net exports also dropped 1.5% from three months ago, according to Japan’s cabinet office.
Pioneer lowered its forecasts for Japan’s 2015 GDP to 0.7% from 0.9%, and to 1.6% from 1.8% in 2016.
A modest GDP recovery is expected in Japan in the coming years and a further intervention by the BOJ to support Japanese exports is likely, said Monica Defend, head of global asset allocation research with Pioneer.
Pioneer does not rule out the possibility of the BOJ adopting QE possibly after Oct. 31 due to the worse-than-expected economic conditions that have been in place this year, Defend added, when “a proper and official certification of the deterioration in the economic outlook will likely arrive with the [official] outlook update.”