Japan Forecast To Grow – Expanding QE, Raising the Sales Tax


Japan, the world’s third largest economy is expected to grow 2.6% in the fiscal year to March 2014. This is according to Reuters who also says that there is a 60% chance that the BOJ will expand their QE efforts by mid-next year.

Economists hope for the 2013 government spending to lead to growth and forecast 2014’s growth will rely on different drivers. Masayuki Kichikawa, cheif Japan economist at Bank of America Merril Lynch Securities said that “In 2013 government spending and consumption will lead growth, while in 2014 exports and capital expenditure will be the main drivers,”.

Another critical issue on the table for Japan is their potential sales tax increase. Prime minister Abe wants to bump the sales tax up 3%, BOJ’s Kuroda agrees, and the sales tax could be as high as 10% by October 2015.

The free-fall of the Yen againt the dollar slowed down. The USD/JPY has been residing in 97 territory a lot recently and could soon fall below 96.00 again after hitting that 97.70 support. However, against the Euro, the Yen has been dominated again over the past week.

There is no high-market-impact Japanese news expected for the rest of this week.

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