Japan’s government could still decide to delay the consumption tax hike scheduled for April 2014. The damage to credibility may be lessened if the economy is clearly too weak and a sensible alternative plan (with fiscal “forward guidance”) is put in place. However, we think it more likely that the government will press ahead with the hikes due in both 2014 and 2015. The economic costs could be mitigated by some offsetting fiscal measures – including cuts in corporate taxes – and a further loosening in monetary policy. This combination should be negative for the yen, but positive for JGBs and the Nikkei.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services