Japan Government Flags Post Sales Tax Hike Risk

Japan’s government turned slightly more cautious about factory output and flagged a risk that April’s sales-tax hike could have prolonged effects, a sign that the world’s third-biggest economy is struggling with the higher tax and further stimulus might be warranted.

In its monthly report issued on Tuesday, the government stuck to its overall view of the economy, which it had raised in July. The new report said that a moderate recovery trend is intact, adding that there has been an easing from the pullback in demand that followed the sales-tax hike.

Previous monthly reports described industrial output as weakening “recently”, following a boost in demand before the sales tax rose to 8 percent from 5 percent. In the latest report, the government dropped “recently” to sound more cautious about factory output.

Despite that wording tweak, the government left its assessment on industrial output unchanged from July.

“The economy is expected to recover moderately as effects of the sales tax hike ease gradually,” said an official of the Cabinet Office, which compiled the monthly report for August. He added that improvement in the labor market and household income are expected to support private consumption from now on.

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