BOJ confident while SMEs remain pessimistic

In its minutes released late last night, Bank of Japan (BOJ) is cautiously optimistic on the future of Japan's economy as well as its inflation. While threat from China and emerging markets weigh heavily on Japan's export market, especially in ASEAN economies, domestic demand and remains solid. Recent data do point to recovery in consumption.

However, Japan's small and medium sector is not too optimistic though:

• Overall pessimism is still persisting in Japanese SME sector, however small business confidence in Japan was slightly better in November compared to October. As per Shoko Chukin Bank's monthly survey, which questions 1,000 companies, reported a reading of 49.9 in November, compared to 48.7 in October.
• Optimism has taken a massive hit due to the sales tax rise, especially to the SME sector, which doesn't have weaker Yen exposure and cater mostly to domestic economies. Last time the indicator was above 50, which signals optimism was back in 2014, before the tax hike.
   
• Another pending hike from current 8% to 10%, also weighing on optimism.

In terms of lending, since rates were already at quite a low, new initiatives from BOJ has hardly helped companies catering to domestic demand. However, it is difficult to call the program failure in domestic front, since it could have been far worse for Japanese economy (tax rise), without BOJ easing.

Yen is up against Dollar so far this week, trading at 122.6.