Japan Economy Struggling Under Tax Increase

Confidence at Japanese manufacturers fell the most in nearly two years in September as a tax increase hit the economy harder than expected, while exports slid in August in a further sign that conditions have deteriorated in the crucial third quarter.

This frailty in the monthly Reuters Tankan business confidence, and the shaky outlook, could raise in coming months the pressure on the BOJ to ease policy further and complicate Prime Minister Shinzo Abe’s decision on whether to raise the national sales tax again.

The first phase of the tax hike in April triggered a 7.1 percent slump in the economy in the second quarter – the worst contraction since the global financial crisis.  The third quarter data will be crucial for Abe’s second-stage tax-rise decision, due by year-end, but some analysts say the Reuters survey suggests that the expected recovery is not taking hold.


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