JAPANESE Prime Minister Shinzo Abe yesterday pledged to use all available policy tools to keep the wheels of the economy turning as financial markets were gripped by uncertainty in the wake of Britain’s shock vote to exit the European Union.

    The yen’s spike following the referendum has kept Japanese policymakers on edge as they fret of the pain a strong currency inflicts on an export-reliant economy, already reeling from weak consumption.

    Retail sales fell more than expected in May in a third straight month of annual declines, keeping policymakers under pressure to top up stimulus.

    “Consumer spending has been stagnant and the trend is likely to continue for a while due to sluggish growth in wages,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

    In a meeting to discuss post-Brexit market developments, Abe urged Bank of Japan (BOJ) Governor Haruhiko Kuroda to ensure the central bank provides ample funds to the market to prevent any credit squeeze.

    “A sense of uncertainty and worry about risks remain in the markets,” Abe told the meeting, the second such engagement between the government and the BOJ following the referendum.

    The premier also called on Finance Minister Taro Aso to keep a close watch on currency moves and respond flexibly to market developments in coordination with Group of Seven economies.

    Abe is expected to hold similar meetings regularly as Tokyo looks to put in place safeguards against potential instability in financial markets after Britain’s messy EU divorce.

    The rush of money to safe havens such as the yen has been stoked by fear Brexit would adversely affect Britain’s economy, and undermine already fragile growth in the EU, causing more disruption in global investment and trade.

    Japan stepped up threats to intervene to weaken the yen after the Brexit vote drove the currency to multi-year highs, but the risks of a costly failure may dissuade policymakers from matching words with action.

    The dollar firmed to 102.63 yen yesterday, moving away from its 2-1/2-year low of 99 touched Friday.

    The BOJ is also wary of rushing into expanding its monetary stimulus, preferring to wait and see if the market turmoil lasts long enough to threaten Japan’s economic recovery, sources say.

    Hence, analysts see Abe’s meetings as more a symbolic move to show the public the government is doing what it can to contain damage ahead of a July 10 upper house election in Japan.

    “There’s not a lot of policy tools left for authorities to reboot the economy. Therefore, Abe has no choice but hold meetings one after another at least until the July election,” said Yasuji Yajima, chief economist at NLI Research Institute.

    “If the yen spikes beyond 100 to the dollar, authorities would intervene in the currency market but I doubt whether it could have a lasting impact,” he said.

    Japan’s economy expanded at the fastest pace in a year in the first quarter but analysts say growth will not pick up much for the rest of this year as slow wage gains weigh on consumption. External headwinds, such as weak emerging market demand and the yen’s gains, also cloud the outlook for exports. (SD-Agencies)