In the wake of the below-expectation GDP data the yen has strengthened yet again while the Nikkei continues to fall:
So far, continuation of last week’s moves
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From the Wall Street Journal on some analyst reactions my bold):
“The big rise in car sales lifted overall consumption as consumers rushed to buy ahead of the tax,” said Dai-ichi Life Research Institute economist Yoshiki Shinke, adding that non-rush demand didn’t seem to be picking up. “Things such as a rise in prices pushing down real incomes likely weighed” on spending.
- Economists say the biggest challenge facing Japan’s economy now is the expected drop in demand from businesses and consumers in the immediate aftermath of the sales tax rise.
Some economists remain relatively optimistic, though.
Mitsubishi Research Institute chief economist Yoko Takeda said that despite the sales tax increase, a rise in wages and business investment will lift Japan’s economy in 2014.
“Recent company profits have been very good, and I think they’re going to put some of that toward higher wages and more investment,” she said.
She added that even if personal consumption falls immediately following the sales tax increase, a rise in bonuses later in the year will likely help revive households’ appetites for spending.
