Delay to the sales tax hike to be JPY-negative – Nomura

By FXStreet According to Yujiro Goto, FX Strategist at Nomura, a delay of a planned sales tax hike in Japan is increasingly likely, which in view of Mr. Goto, should have negative effects on JPY.

Key Quotes

“Last Friday Nikkei reported that Prime Minister Abe had decided to delay the sales tax hike currently scheduled for April 2017. Prime Minister Abe reportedly denied the claim over the weekend (Reuters), while Chief Cabinet Secretary Suga also said today that it was not true that Prime Minister Abe had decided to delay the tax hike (Bloomberg).”

“After the BOJ disappointment, we judge fiscal policy will be the near-term focus for Japanese macro policy development. Our economists now see a tax hike delay as the more likely scenario. Although both Mr Abe and Mr Suga have reportedly denied the Nikkei article, we expect Prime Minister Abe to announce a delay to the sales tax hike after the G7 summit meeting.”

“We expect an announcement of fiscal stimulus accompanied by a delay to the sales tax hike to be JPY-negative for the following reasons: 1) risk sentiment among Japanese investors would be positively influenced, encouraging foreign portfolio investment, 2) correlation between Japanese equity and USD/JPY remains high, …read more

Source:: FX Street