BOJ Still Optimistic About Regional Economies Says Sales Tax Effect Will Not Last

The Bank of Japan maintained its upbeat view on most of the country’s regional economies, adding to reassurances from its governor that the world’s third-largest economy can ride out the pain from a sales tax hike without additional stimulus.

Also on Thursday, a Reuters survey showed manufacturers were more confident about business conditions in April and saw a more moderate dip over the next three months, suggesting the damage from the tax hike may be less pronounced than thought.

The optimism may add to a growing consensus in financial markets that the central bank will hold off on easing policy until around July to spend more time scrutinizing the impact from the April 1 tax hike on domestic consumption.

In a quarterly report analyzing nine regional sectors of Japan, the BOJ raised its assessment for one and left unchanged its view for the rest to say they are all recovering moderately. None of the regional assessments were revised down.

“Domestic demand has been firm, production has been rising moderately as a trend, while job markets and income conditions have been improving,” according to the report compiled at a meeting of the central bank’s regional branch managers.

via Reuters

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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