Today, Japan’s previously announced fourth quarter 2009 GDP estimate was slashed to 3.8% (annualized) vs. the 4.6% rate previously thought.
The nation’s GDP deflator came in at -2.8%, revised from -3.0%.
In case you missed it, the Bank of Japan is under massive political pressure to unleash looser monetary policy than even ultra-loose Japan has ever seen.
Just two weeks back, Japan’s outspoken banking minister Shizuka Kamei pushed for the BOJ to directly underwrite public debt. “I suggest the BOJ directly underwrite government bonds to help the government come up with financial resources,” he said.
It’s a move ‘the BOJ is strongly opposed to for fear of triggering runaway inflation in the long term.’ according to Reuters.
The old 4.6% Japanese GDP number provided some political cover for the BOJ to exercise some restraint, but now that the data has been revised down substantially, expect even more pressure for the BOJ to stimulate the economy. Afterall, Mr. Kamei already pledged that he wants to defeat deflation this year, once and for all. The only way to do so is to pioneer some of the loosest monetary policy the world has ever seen given that Japan has already been playing with near-zero interest rates for so long.