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1 Oct 2013
PM Abe announces huge boost in Japan’s economy as of ¥5trillion
FXstreet.com (Athens) – About an hour earlier the Prime Minister of Japan Abe, announced that the Japanese government will inject an economic stimulus package worth around 5 trillion yen ($50.96 billion) to cushion the impact from the sales tax hike planned next April.
Japan’s Abe wastes no time to official announce after tax increase the stimulus package
After the Tankan survey – which might be well considered as the ‘absolute gauge’ sentiment regarding Japan’s industries – released at solid levels, PM Abe didn’t waste his time. Thus, after announcing that Japan will move forward with raising the sales tax from 5% to 8% in April, as planned, he also stated clearly approximately an hour later that the government will compile an economic stimulus package worth around 5 trillion yen ($50.96 billion) in order to offset any potential negative impact emerging from the sales tax hike planned next April. Traders should not in any case be taken aback by Abe’s movement, as markets had already priced in that as long as the Tankan survey was released at solid figures, Abe would proceed on such a movement. We would like to remind to the investors that we are witnessing a déjà vu of the late 90’s; being more précised, we are ahead of an Japanese fiscal tightening (sales tax from 5% to 8%) as well as Fed monetary tightening (the notorious QE3 tapering).
Furthermore, the Japan’s PM Abe suggested that the retail sales tax increase from 5% to 8% was more than a choice, as improving Japan's finances is a "matter of urgency", while he pointed out that both the stimulus package of the 5trillion yen which will reduce tax hike’s negative growth impact, as well as the sales tax hike are the only way to combine growth with fiscal reforms in Japan. Last but not least, the careful investor who reads behind the lines, might realize that the Japanese Finance Minister Aso does not fully feel comfortable with PM movements. Elaborating on, while the PM Abe said that “wants rulign parties to quickly consider corporate tax cut. Further rise in sales tax to depend on economic conditions”, the Finance Minister of Japan, Aso said through global wires that “will consider corporate tax cut in the mid- to long-term, if needed. Hasn't heard of when talks on that may start.” Finally, Aso added that he “wants to fund Y5tn stimulus with tax revenue and other means, without new bond issuance,” and we consider that he might not totally agree with PM’s moves.
Japan’s Abe wastes no time to official announce after tax increase the stimulus package
After the Tankan survey – which might be well considered as the ‘absolute gauge’ sentiment regarding Japan’s industries – released at solid levels, PM Abe didn’t waste his time. Thus, after announcing that Japan will move forward with raising the sales tax from 5% to 8% in April, as planned, he also stated clearly approximately an hour later that the government will compile an economic stimulus package worth around 5 trillion yen ($50.96 billion) in order to offset any potential negative impact emerging from the sales tax hike planned next April. Traders should not in any case be taken aback by Abe’s movement, as markets had already priced in that as long as the Tankan survey was released at solid figures, Abe would proceed on such a movement. We would like to remind to the investors that we are witnessing a déjà vu of the late 90’s; being more précised, we are ahead of an Japanese fiscal tightening (sales tax from 5% to 8%) as well as Fed monetary tightening (the notorious QE3 tapering).
Furthermore, the Japan’s PM Abe suggested that the retail sales tax increase from 5% to 8% was more than a choice, as improving Japan's finances is a "matter of urgency", while he pointed out that both the stimulus package of the 5trillion yen which will reduce tax hike’s negative growth impact, as well as the sales tax hike are the only way to combine growth with fiscal reforms in Japan. Last but not least, the careful investor who reads behind the lines, might realize that the Japanese Finance Minister Aso does not fully feel comfortable with PM movements. Elaborating on, while the PM Abe said that “wants rulign parties to quickly consider corporate tax cut. Further rise in sales tax to depend on economic conditions”, the Finance Minister of Japan, Aso said through global wires that “will consider corporate tax cut in the mid- to long-term, if needed. Hasn't heard of when talks on that may start.” Finally, Aso added that he “wants to fund Y5tn stimulus with tax revenue and other means, without new bond issuance,” and we consider that he might not totally agree with PM’s moves.