Thursday, September 18, 2014

Reuters — Japan government cuts economic view, warns of stalling consumption

Japan's government cut its overall economic assessment for the first time in five months as private consumption is struggling to recover from the slump caused by April's sales tax hike, clouding the outlook for a sustained recovery.
The government on Friday cut its view on private consumption, which accounts for about 60 percent of the economy, saying that consumer spending is seen pausing although a pick-up trend remains intact.
The assessment followed a run of weak indicators, including falling household spending, which raised doubt about the strength of an expected bounce in the current quarter - a crucial factor for Prime Minister Shinzo Abe's decision in December on whether to proceed with a second tax rise next year.
Just like we said, and just like last time a tax hike was tried.

And did austerity help the yen?

Oops.


Should stimulate their export market though and give some foreign firms heartburn.

Reuters
Japan government cuts economic view, warns of stalling consumption

6 comments:

NeilW said...

"Should stimulate their export market though and give some foreign firms heartburn."

Experience from the UK says that ain't necessarily so.

Matt Franko said...

The firms drop the price of their goods in USD terms and this is what sets the exchange rate... looks like this trend will continue for a bit.... rsp,

NeilW said...

"The firms drop the price of their goods in USD terms and this is what sets the exchange rate"

Nobody really knows what sets the exchange rate.

Lots of people think they do, but it is a multi-layered dynamic problem.

Ryan Harris said...

Abe reshuffled his cabinet a couple weeks back because his poll numbers began to drop as his economic miracle began to stumble. I think he is under pressure to re-think the next tax rate rise and to expedite the corporate tax cuts. And maybe the weaker yen is anticipation of larger fiscal deficits and further deterioration of the current account and by extension the BoP?

There are only a handful of nuke reactors likely to restart this year so no chance of yen strength by decreasing energy imports either.

mike norman said...

Well, according to MMT, austerity (debt reduction) is supposed to make the yen "harder to get." This was a total fail for MMT and its predictive ability. It cost me...a lot!!

Ryan Harris said...

Yeah. The unrealistic treatment of the external sector is my big gripe about MMT. It's no better than mainstream at describing capital and current flows between countries.

But when predicting domestic GDP growth and knowing when long term dollar or pound trends will succeed or fail only considering the domestic economy, MMT has been helpful.

There needs to be alot of discussion around the external sector so that the academics can be seeded with and forced to adopt new ideas to make a better description of how markets and countries really work. The current papers are an embarrassment.