JAPAN

摘要

At the beginning of this month, Prime Minister Shinzo Abe once again chose to postpone the proposed sales tax hike, with the increase from 8% to 10% now scheduled to take place in October 2019 instead of in April 2017. The Japanese premier had previously insisted that the controversial move would go ahead as planned barring a major economic or natural disaster, but in the end deemed that it posed a significant risk to muted domestic demand and had the potential to spark another recession, similar to the one witnessed on the back of the first hike in April 2014. Mr. Abe has undertaken a decision which is likely to cost the government trillions of yen in lost revenue, but he can at least take heart from the Q1 national accounts, which revealed that the economy comfortably managed to avoid recession. Despite a -0.7% (q-o-q) decline in business investment, the quarterly release showed a robust 0.5% (q-o-q) expansion in GDP due to a 0.6% (q-o-q) increase in private consumption. In annual terms, growth was flat as private consumption contracted by -0.5% (y-o-y) and business investment rose very modestly by 0.2% (y-o-y). Many of our panellists have upgraded their GDP forecasts this month following the change to the tax schedule, with the consensus now predicting that the economy will advance by 0.5% this year, and most notably 0.9% in 2017.