FXStreet (Delhi) – Research Team at Nomura, lists down the key events of Japanese economy for 2016.
Key Quotes
“Summary (1) Four events for monetary policy
Four events with major implications for monetary policy in 2016 that we see are (1) changes to the Bank of Japan’s official communications, (2) changes to Policy Board personnel, (3) a possible decision by the government to declare an end to deflation, and (4) the base revision of the CPI. The stance of new Policy Board members, the importance of the 2% price stability target, and revisions to inflation data are all expected to influence the course of monetary policy in 2016.
Summary (2) Outcome of spring wage talks
Modest demands by labor unions are a downside risk to the outcome of the wage negotiations. But given government pressure for pay hikes and its scope for further action, we do not see it as a significant risk for now.
Summary (3) Main political event: Upper House election
Large gains by the ruling coalition would boost expectations of Japanese growth. Meanwhile, the loss of a substantial number of seats (risk scenario) would shake the government’s foundations. Issues ripe for exploitation by the opposition include revisions to security legislation, the Trans-Pacific Partnership, and the government’s inability to decide on a lower tax rate for certain product categories when the consumption tax is raised again. Another point of interest for us will be whether a Lower House election is held along with the Upper House poll.
Summary (4) Fate of consumption tax hike
We think the government will implement the consumption tax hike on schedule. Any delay will probably be related to the issue of exemptions from the higher tax rate for certain product categories. We cannot completely rule out the possibility of the tax increase being postponed because there is not enough time for businesses to prepare for it or because funding cannot be found (or for some other reason, citing these two as an excuse).
Summary (5) Specific measures for Abenomics 2.0
The government plans to announce concrete measures in May for the Promotion of Dynamic Engagement of All Citizens initiative, also known as Abenomics 2.0, or the new Three Arrows. An upward revision to the target for attracting foreign tourists (along with related measures) and a further reduction in the effective corporation tax rate in a bid to increase GDP to ¥600trn would both boost the economy. Lifting the birthrate to 1.8 will almost certainly require further enhancements to childcare services.
Summary (6) R&D investment to be counted as GDP
R&D investment will be counted as GDP under the 2008 SNA framework. We think it will still be difficult to raise GDP to ¥600trn by 2020. However, this may give the government further incentive to cut taxes and thereby boost corporate R&D, in which case R&D-related investment would probably increase.”
(Market News Provided by FXstreet)