Japanese Prime Minister Shinzo Abe confirmed that Japan government will go ahead with a planned hike in tax rate. It will be follow up on the previous increase in 2014, when sales taxes were hiked from 3% to 8% and if it goes well, next year it will further rise to 10%. This sales tax hike has been one of the key aspects on Abenomics to improve Japan’s fiscal position, only developed country to have debt to GDP ratio more than 200%.
Today Japanese parliament passed 2016 budget of ¥96.7 trillion, biggest on record. After that speaking at a conference Abe confirmed unless severe economic shock like collapse of Lehman Brothers or severe earthquake to occur, sales tax will rise in April 2017.
Japanese economy plunged to severe recession after sales tax was hiked in 2014, leading to Bank of Japan (BOJ) introducing fresh round of stimulus.
However, Bank’s latest rounds of stimulus in the form of negative rates haven’t gone well as intended. It was successful in bringing down the cost of borrowing by flattening of the yield curve but couldn’t boost the stock markets as intended nor it weaken Yen, which as of now trading at 113.6 per Dollar.
