What to make of the consumption tax hike?(Mar 2014)
Japan’s economy is expected to continue gradual expansion
March 19, 2014
Summary
◆Economic outlook revised: In light of the second preliminary Oct-Dec GDP release (Cabinet Office), we have revised our economic growth outlook. We now forecast real GDP growth of +2.2% y/y for FY13 (previous forecast: +2.3%) and +1.0% for FY14 (+1.0%). Our new outlook for FY15 is +1.5% (unchanged from previous forecast). (For further detail, see “Japan’s Economic Outlook No. 180 Update (Summary),” by Mitsumaru Kumagai, 18 March 2014.) Japan’s economy is expected to continue expanding in the future for the following reasons: (1) Firming up of exports due to US economic recovery, (2) Ongoing depreciation of the yen and stock price highs in response to BOJ’s monetary easing, and (3) Effects of government’s economic policy accompanying consumption tax hike.
◆Four major issues facing Japan’s economy: In this report we examine four major issues facing Japan’s economy: (1) The need to increase wages, (2) BOJ’s price stability target, (3) The current account deficit, and (4) Economic disparity.
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