Japan: The VAT increase has plunged growth … – Les Echos

Japan: The VAT increase has plunged growth … – Les Echos

Japanese growth fell 1.7% in the second quarter. An expected decline that shows the aftermath of the VAT increase occurred in April

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The Japan GDP fell by 1.7% between April and June compared to the first quarter. YoY growth in Japan, however, remains strong with an increase of 6.8%. The bad news for Prime Minister Shinzo Abe has launched an ambitious stimulus policy dubbed “Abenomics,” however, was widely expected by analysts.

The sustained growth of the first quarter (1.5%) was in fact largely due to consumers who had anticipated their purchases before the VAT increase of 1 ^st April (from 5% to 8% on that date).

But even expected, this decline is the first recorded by Tokyo since the country came out of recession in the latter months of 2012 Since indeed, Japan’s GDP was invariably increased, except in the fourth quarter 2013 He then stagnated.

The detailed figures released Wednesday show clearly the extent of the impact of the VAT increase. Household spending plunged 5.2%, while at the same time companies reduced their investments by 2.5%. Real estate has also been greatly affected with a fall of 10.3%

direct result of this situation, imports slowed sharply (with a decline of 5.6%) while at the same time exports hampered by the strong yen, still failed to recover and showed a slight decline of 0.4%.

The government of Meanwhile decreased their investments (-0.5%), but this decline should be temporary because the government has subsequently voted by a package of support (40 billion euros), which is intended to take over from previous budgets Recovery voted early 2013 shortly after the arrival in power of Shinzo Abe.

A hiccup?

In Despite this against economic performance, the government is optimistic. “Our vision has not changed,” said Wednesday the Minister of Economic revitalization, Akira Amari, quoted by Jiji agency. He said the tax effect, in line with their expectations, gradually fades. And repeat the decision on a possible new rise of the “Japanese VAT” would be taken at the end of the year, based on the indicators for the third quarter.

Scheduled in October 2015 and advocated by the International Monetary Fund, the passage at a rate of 10% is to perpetuate the welfare system and to address the rise of the colossal public debt of the country, which already accounts for 250% of its gross domestic product (GDP ), a level unmatched in the developed world.

Economists foresee them as “a recovery in the coming months.” “The second quarter is an exception,” said Yoko Takeda, the Mitsubishi Research Institute, referring to the GDP figures from July to September who themselves will tell whether or not the “Abenomics” won their bet .

IMF had delivered the same analysis in late July, saying “the conditions are so that Japan can overcome” the wave of fiscal shock. And to suggest that growth is forecast at 1.6% for the full year 2014, substantially the same as last year (1.5%).