Abe Tax Hike and Lack of Stimulus Puts Bank of Japan in a Corner

A lack of detail from Japan’s Prime Minister Shinzo Abe about how the government will buffer the economy from a controversial rise in the sales tax adds pressure on the Bank of Japan to step up its monetary stimulus, analysts say.

Abe, who implemented radical economic policies – dubbed Abenomics – to revive the world’s third-biggest economy, said on Tuesday the country’s sales tax would rise to 8 percent from 5 next year as planned. The hike is seen as necessary to help ease Japan’s heavy debt load.

But an announcement on a stimulus package to offset the impact of the tax hike fell short of expectations. Instead of unveiling a cut in corporate tax, as anticipated by analysts, Abe said he had asked ruling parties to start a debate on corporate tax cuts and that a 5 trillion yen ($51 billion) stimulus package would be compiled in December.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza