Japan’s increased fiscal action likely – BBH

By FXStreet Analysts at Brown Brothers Harriman explained that Japan and China are the two most likely candidates for increased fiscal action.

Key Quotes:

“It is clear that the BOJ has become frustrated that its aggressive asset purchase program and the resulting increase in the monetary base has been insufficient to lift core (excluding fresh food) measure of inflation. The adoption of negative interest rates recently opens a new front in the battle against lowflation.

Japan has been using fiscal policy as well. Its budget deficit for the fiscal year ending next month is about 6% of GDP. Last month, a JPY3.5 trillion supplemental budget was approved for the current fiscal year. The budget for the next fiscal year is still making its way through the Diet, but reports today suggest, an extra spending package will likely be included. This is unusual because the supplemental budget is typically a development late in the fiscal year. There has been a supplemental budget every year since 2011.

Part of the rub for Japan is that the economy has not managed to find solid footing since the retail sales tax was hiked. A follow-up hike is scheduled for a year from now (April 2017). The …read more

Source:: FX Street