Japan upgrades economic view ahead of sales tax decision
2013-09-13 10:46:34
The Japanese government on Friday upwardly revised its assessment of the economy, citing a pick up in business investment, according to a monthly report released by the Cabinet Office on Friday. The upgrade supports the government's case for a scheduled two-stage hike in the sales tax.
"The Japanese economy is on the way to recovery at a moderate pace," the government said in its September report, upgrading its assessment from August. when it said the " the economy is picking up steadily and showing some movements on the way to recovery."
The government also upgraded its view on capital spending, saying that business investment is showing movements of picking up, mainly among non-manufacturing industries. The August report had said business investment is leveling off with some movements of picking up.
Reiterating its view on the price situation, the Cabinet Office said the recent price developments indicate deflation is ending. However, the assessment of exports and private consumption was revised lower, with the report noting moderation in the uptrend.
On the short-term prospects, the Cabinet Office said the recovery is expected to take hold as household income and business investment continue to rise, while exports pick up and the impact of the recent policy actions unfold.
The report reiterated that a slowdown of overseas economies still remained a downside risk to Japan's recovery.
Prime Minister Shinzo Abe is expected to announce his decision on doubling the sales tax early in October. Abe on Tuesday instructed his ministers to prepare an economic package to support the economy cushion the impact of planned hike. The size of the package is expected to exceed JPY 2 trillion.
The plan is to raise the consumption tax to 8 percent in April 2014 and to 10 percent in October 2015 from the current 5 percent.
Recent economic indicators suggest that the economy is now strong enough to withstand the impacts of the tax hike, which may weigh on consumer spending for some time to come.
On Monday, the government upwardly revised its gross domestic product estimate for the June quarter, saying the economy grew at an annualized pace of 3.8 percent compared with the preliminary estimate of 2.6 percent reported on August 12.
The government will also assess the Bank of Japan-Tankan survey of business sentiment, which is slated for release on October 1, before taking a final call on the matter.
Earlier today, the Nikkei newspaper reported that Japan may cut corporate taxes by about 2 percentage points in the fiscal year starting April.