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2 Oct 2013
Flash: Japan's stimulus measures to balance out adverse effect of tax increase - Nomura
FXstreet.com (Barcelona) - Following Prime Minister Shinzo Abe announcement to raise the sales tax to 8% from 5%, with effect from April 2014, together with the decision to provide stimulus measures to counter the adverse economic effect of the tax increase, Nomura Economists estimate this will see a 0.55 ppt boost to FY14 GDP from stimulus measures.
Key Quotes
"We estimate the scale of tax cuts and expenditures included in the economic stimulus package will be about ¥5.9trn. We estimate the stimulus measures would have the effect of boosting FY14 real GDP growth by 0.55ppt."
"As we expect the consumption tax increase to drag down real GDP growth by 0.64ppt, we expect the stimulus to more or less offset the adverse effect of the tax hike."
"Japan’s corporation tax rate is high relative to those of other Asian countries and economies, and we are in favor of a reduction in the tax over the medium term. We take a favorable view of the Abe administration’s indication of its plan to lower the corporate tax with the latest announcement."
"We expect the stimulus package to be carried out within the framework of a so-called 15-month budget, in which the FY13 supplementary budget and the FY14 budget are drafted as one. Spending items would be included for the most part in the FY13 supplementary budget and the tax reduction items in the FY14 budget."
"If the FY13 supplementary budget is approved early, it will give time for local assemblies to deliberate and implement spending so that the adverse effect of the consumption tax hike can be countered when it is at its worst in Apr-Jun 2014."
Key Quotes
"We estimate the scale of tax cuts and expenditures included in the economic stimulus package will be about ¥5.9trn. We estimate the stimulus measures would have the effect of boosting FY14 real GDP growth by 0.55ppt."
"As we expect the consumption tax increase to drag down real GDP growth by 0.64ppt, we expect the stimulus to more or less offset the adverse effect of the tax hike."
"Japan’s corporation tax rate is high relative to those of other Asian countries and economies, and we are in favor of a reduction in the tax over the medium term. We take a favorable view of the Abe administration’s indication of its plan to lower the corporate tax with the latest announcement."
"We expect the stimulus package to be carried out within the framework of a so-called 15-month budget, in which the FY13 supplementary budget and the FY14 budget are drafted as one. Spending items would be included for the most part in the FY13 supplementary budget and the tax reduction items in the FY14 budget."
"If the FY13 supplementary budget is approved early, it will give time for local assemblies to deliberate and implement spending so that the adverse effect of the consumption tax hike can be countered when it is at its worst in Apr-Jun 2014."