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12 Aug 2013
Big miss in Japan's Q2 GDP; Incremental sales tax hike looming?
FXstreet.com (Barcelona) - Japan's Gross Domestic Product (QoQ) for the second quarter came at 0.6% vs 0.9% exp and 1.0% last, while the GDP Annualized (seasonally adjusted) for Q2, stood at 2.6% vs 3.6% exp, 4.1% prior. The GDP Nominal (seasonally adjusted) for Q2, came at 0.7% vs 1.0% exp and 0.6% last. GDP Deflator y/y for Q2 showed -0.3% vs -0.7% exp and -1.1% last. The data is much weaker-than-expected. On the positive side though, Domestic Consumer Goods Price Index came stronger.-than-expected at +2.2% y/y vs expected 1.9%, prior 1.2%.
The Q2 GDP data is crucial on deciding whether the sales tax hike will be approved in one way or the other. There has been recently plenty of chatter about implementing a 1% Incremental approach on the sales tax, in order to lessen the negative impact on consumer spending. Note today’s is the preliminary data, with the revised figures due on September 9. Only after that data a final decision on the sales tax hike is expected.
Judging by the data, chances are that the Japanese government will tend to err on the side of caution and rather than imposing an aggressive 3% tax sales hike in the economy that may further hurt growth prospects (big miss today), instead, they may opt for a more conservative 1% incremental approach.
As reported last week: "If the 1% increments are approved, the risk if that the Yen may enjoy further strength, as the market sees this option as a temporary formula allowing the economy to continuously grow while not being that badly hurt by the tax hike, which leads to the belief of no additional easing by the BoJ necessary unless signs of a significant slowdown emerge."
The Q2 GDP data is crucial on deciding whether the sales tax hike will be approved in one way or the other. There has been recently plenty of chatter about implementing a 1% Incremental approach on the sales tax, in order to lessen the negative impact on consumer spending. Note today’s is the preliminary data, with the revised figures due on September 9. Only after that data a final decision on the sales tax hike is expected.
Judging by the data, chances are that the Japanese government will tend to err on the side of caution and rather than imposing an aggressive 3% tax sales hike in the economy that may further hurt growth prospects (big miss today), instead, they may opt for a more conservative 1% incremental approach.
As reported last week: "If the 1% increments are approved, the risk if that the Yen may enjoy further strength, as the market sees this option as a temporary formula allowing the economy to continuously grow while not being that badly hurt by the tax hike, which leads to the belief of no additional easing by the BoJ necessary unless signs of a significant slowdown emerge."