Tags: Japan | Economy | Tax | Hike

Japan to See More Positive Data, Boosting Case for Tax Hike

Friday, 06 Sep 2013 07:08 AM

Japan will see more evidence next week that a solid economic recovery is taking hold, including a sharp upward revision to second-quarter GDP — fortifying the case for Prime Minister Shinzo Abe to proceed with a planned sales tax hike next year.

The world's third-largest economy likely expanded an annualized 3.7 percent in April-June, much stronger than the 2.6 percent growth preliminary figures suggested, because capital expenditure increased more than first thought, a Reuters poll showed.

The revised gross domestic product (GDP) data, due on Monday, will underscore the view the benefits of Abe's reflationary policies are broadening as companies, more confident about their business prospects, start to increase spending on wages and equipment.

It will also give the government more ammunition to counter critics of the tax hike, who have called for a delay or watering down of the increase for fear of derailing the recovery.

"The rebound in capital spending will make it even more difficult to justify changing the schedule (for the tax hike)," said Ryutaro Kono, chief Japan economist at BNP Paribas.

"The sales tax will be increased as scheduled, unless something unexpected happens from now until the time the decision is made, which is seen around end-September to early October."

The government has cited revised GDP data as among key factors in deciding whether to go ahead with lifting the sales tax to 8 percent from 5 percent next April, and to 10 percent in October 2015.

The upward revision largely reflects a finance ministry survey that showed a healthy increase in corporate capital spending, which policymakers say is key in gauging whether the economic recovery is sustainable.

Core machinery orders, due on Thursday, rose 2.4 percent in July after a 2.7 percent drop in June, according to the Reuters poll, suggesting further gains in capital expenditure.

Japan emerged from recession in 2012 and data for much of this year has shown the benefits of Abe's reflationary policies and the BOJ's aggressive stimulus.

Recent data has been particularly encouraging, with the jobless rate at the lowest in almost five years, summer bonuses increasing and core consumer prices rising at the fastest pace in nearly five years.

The BOJ raised its assessment of the economy on Thursday to say it is recovering, its most upbeat view since before the collapse of Lehman Brothers jolted global markets in 2008.

Separate data due on Monday will show Japan logged a current account surplus of 487.8 billion yen ($4.88 billion) in July, down 26.4 percent from a year earlier, according to the Reuters poll.


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Japan will see more evidence next week that a solid economic recovery is taking hold, including a sharp upward revision to second-quarter GDP - fortifying the case for Prime Minister Shinzo Abe to proceed with a planned sales tax hike next year.
Japan,Economy,Tax,Hike
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2013-08-06
Friday, 06 Sep 2013 07:08 AM
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