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19 Aug 2013
Flash: USD/JPY upside remains capped ahead of Q2 GDP release – UBS
FXstreet.com (New York) - Japan's weaker than expected Q2 GDP print showing 2.6% annualized growth has sparked further debate amongst policymakers over whether to implement planned hikes in the country's sales tax, suggests Mohi-uddin, Mansoor at UBS.
Key quotes
“That uncertainty is likely to keep the Nikkei and the USD/JPY capped in current ranges until officials make a final decision, most likely around the end of next month after the second estimate of Q2 GDP is released on September 9.”
“Both Prime Minister Abe's economic advisers, Honda and Hamada, remain concerned that a hike in the sales tax from 5% to 8% at the start of the next financial year on 1 April 2014 would derail Japan's economic recovery. In contrast, the Finance Ministry, the Bank of Japan and the IMF are strongly in favor of fiscal tightening.”
“We expect some increase in the sales tax will go ahead in 2014. That, however, is likely to be tempered by either a mini-fiscal stimulus package or cuts in Japan's corporate tax rate. The latter sparked interest this week following an article in the Nikkei newspaper suggesting Abe had ordered a study on the topic.”
Key quotes
“That uncertainty is likely to keep the Nikkei and the USD/JPY capped in current ranges until officials make a final decision, most likely around the end of next month after the second estimate of Q2 GDP is released on September 9.”
“Both Prime Minister Abe's economic advisers, Honda and Hamada, remain concerned that a hike in the sales tax from 5% to 8% at the start of the next financial year on 1 April 2014 would derail Japan's economic recovery. In contrast, the Finance Ministry, the Bank of Japan and the IMF are strongly in favor of fiscal tightening.”
“We expect some increase in the sales tax will go ahead in 2014. That, however, is likely to be tempered by either a mini-fiscal stimulus package or cuts in Japan's corporate tax rate. The latter sparked interest this week following an article in the Nikkei newspaper suggesting Abe had ordered a study on the topic.”