Japan: Likelihood of policy responses rises – Nomura

By FXStreet Research Team at Nomura, suggests that the recent weak economic data and market turmoil have been clearly increasing the likelihood of policy responses from the Japanese authorities, potentially including a further delay of the consumption tax hike.

Key Quotes

“Prime Minister Abe’s economic advisor, Mr Honda, today said that the BOJ should act pre-emptively to change the deflationary mindset in Japan, according to Bloomberg. He also said the action could come as soon as March, which we now also see as a high possibility. Mr Honda also argued that fiscal stimulus from the government is necessary, as the economy contracted in Q4 2015. He said an extra budget of about JPY5trn is necessary to stimulate the economy, and the government has to announce something big to show its resolve. Mr Honda also argues that the government should consider delaying the consumption tax hike currently scheduled for April 2017 to April 2019.

In November 2014, Prime Minister Abe called a snap election when deciding to delay the tax hike then scheduled for October 2015. At that time Prime Minister Abe pledged not to delay the sales tax hike further, so if he decides to postpone it again he will have to ask for …read more

Source:: FX Street