In Tokyo, Bank of Japan Governor Kazuo Ueda is searching for an exit from 23 years of quantitative easing. However, the answers he seeks could lie more in Beijing.Japanese policymakers are as surprised as anyone by the underperformance of China’s economy. Back in January, Team Ueda fully expected a powerful growth boost from Asia’s biggest economy that buttressed the argument for higher borrowing costs. Instead, Japan and its neighbours are grappling with the fallout from Chinese deflation, overcapacity and dithering on efforts to end the property crisis. Even if Chinese exports are thriving, weak import activity is being felt throughout the region.
For Ueda to feel comfortable tapping the brakes, he must believe China will add more economic energy than its domestic troubles are subtracting. So far, there is scant evidence that’s going to happen in 2024.
Ueda is hardly alone….
