Japanese Government Raises Economic Assessment Tax Hike Impact Temporary

Japan’s government raised its assessment of the economy on Thursday because a decline in consumer spending after a sales tax increase is starting to fade due to improving consumer sentiment and a tight labor market.

It was the first time in six months that the government has upgraded its overall assessment.

The government said personal spending was showing signs of recovery, an upgrade from last month, as an increase in the nationwide sales tax to 8 percent from 5 percent on April 1 was having only a temporary impact on consumption.

“There are still some weak points, but there are signs that consumption is recovering,” the Cabinet Office said in its monthly economic report. “We expect the recovery to continue as the jobs market and wages improve.”

Personal consumption accounts for about 60 percent of the economy.

Sales of electronics and home appliances are recovering, while sales of cars are showing signs of bottoming out, a Cabinet Office official said.

Bank of Japan Governor Haruhiko Kuroda expressed a similar view to the government on Tuesday, when he said he expected strong demand for labor and upward pressure on wages to bolster consumer spending.

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