Thursday, August 8, 2013

Aggressive stimulus efforts by Abe given strong boost to Japan

The expected increase of 3.6% after 4.1% annualized GDP and the private consumption expected to have risen 0.5% Reversal expected business investment. The growth of the Japanese economy is expected to reach 3.6% annualized in April-June, a Reuters survey showed a third consecutive quarter of expansion that would reflect the impact of increasing net policies "reflationary" Prime Minister Shinzo Abe. The figure released on Monday morning in Tokyo should also strengthen the government's desire to raise the VAT next year, even if the implementation of this project politically sensitive involves many other factors, economists note. The second quarter should certainly have marked a slight slowdown in growth after the 4.1% annualized from January to March, driven mainly by household consumption, but the April-June statistics should show a recovery in exports and business investment, they add. "The growth is balanced with a strong domestic demand and external demand. This is a sign that the impact of political Abe is becoming wider," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute in Tokyo. Compared to the first quarter, gross domestic product (GDP) is expected to have risen 0.9% in April-June, foreign demand are contributing 0.2 shows the Reuters survey.

Private consumption is expected to grow by 0.5% a quarter to the next, which would mark a slowdown after growth of 0.9% in January-March. But business investment, which fell by 0.3% in the first three months of the year, is expected to rebound by 0.7%. Abe's government plans to raise the VAT rate of 5% to 8% in April and 10% in October 2015, as part of efforts to try to contain the public debt, which exceeds 200% of GDP, the highest ratio of the major industrialized countries. This doubling in a year and a half, which is the most ambitious reform of the Japanese taxation engaged for decades, obviously poses risks to the consumer and more broadly for the recovery, as it may curb spending. Abe said he would adopt in the fall a final decision on the matter, in particular according to the changing conditions. Until then, it will be especially aware of the revised second quarter GDP, which is scheduled for publication on September 9. A Reuters survey shows that most private sector economists are in favor of raising the VAT according to the original schedule, considering that the economy can now absorb the impact.

On Monday, the International Monetary Fund (IMF) has called Tokyo to implement the project, considering it was a "necessary first step" to solve the fiscal problems of Japan. But even if GDP figures are as strong as expected and confirmed next month, Shinzo Abe will take a decision after studying the findings of several studies it has commissioned on the expected impact of the reform explain several sources. Careful, the prime minister also asked his staff to consider alternatives to this reform. "A good GDP figures could reinforce the scenario of a VAT increase in the initial project. But the final decision rests with Abe and he alone, “said Yoshiki Shinke. "It will be more important than past GDP figures is how the economy will react if VAT increases indeed. At this stage, it is very difficult to predict."


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