Yujiro Goto, Research Analyst at Nomura, notes that the latest opinion poll conducted by Nikkei showed that 55% of respondents judge it necessary for the government to have a new fiscal package (the poll was conducted from 25 to 27 March).
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“In February, 47% replied that the fiscal package is necessary and thus, support for fiscal expansion among voters is gradually rising. More voters (61%) now object to the sales tax hike, as this compares with 58% in the previous survey. The sales tax hike remains unpopular among voters.
The job approval rating of the Abe cabinet remains high at 46% in March, while falling slightly from 47% the previous month. The LDP’s popularity rating has inched up to 38%. The two opposition parties, the DPJ and JRP, have been merged into a new party called the Democratic Party (DP), but the popularity rating of the new party is just 9%, largely unchanged from the DPJ’s rating in February (8%). The LDP is likely to maintain a majority in the upper house after the upper house election this summer.
The FY2016 ordinary budget was passed in parliament today and Prime Minister Abe has had a press conference on the budget. Again he denied the sales tax hike would be delayed which is currently scheduled for April 2017, but his denial of the delay at this point is unsurprising.
As economic momentum remains weak, the chances of a delay in the tax hike are still gradually rising. PM Abe also said the FY2016 ordinary budget would be front-loaded as much as possible to support the economy, and the front loading of expenditures naturally leads to the need for an extra budget. Although PM Abe has not officially promised an extra budget yet, the government will have an extra budget to support the economy, and its announcement is likely into the G7 summit scheduled on 26-27 May.
We expect Japanese fiscal and monetary policy to be more accommodative in Q2, which will likely have a positive impact on risk sentiment among Japanese investors. Improving risk sentiment will encourage Japanese investors to shift their portfolios into foreign assets, limiting the downside risk of USD/JPY in the new fiscal year.”
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