Intra-Day Market Moving New and Views USD/JPY

Intra-Day Market Moving News and Views

22 Oct 2014

USD/JPY - ...... News report about Etsuro Honda, an economic adviser to Japanese PM Shinzo Abe said that the next sales tax hike should be delayed by a year and half, until Apr 2017, given the big risk that the tax increase would pose for the country's fragile economy.

Honda made the comments to reporters after a meeting of more than 40 ruling party lawmakers who are growing wary about the planned sales tax hike late next year.
"There's a great danger from the next sales tax hike given the current situation where positive effects of Abenomics and negative impact of April's sales tax hike are offsetting each other," he said, referring to Abe's reflationary policies.

"So I told them that the next tax hike should be postponed by a year and half until April 1, 2017" after Japan can ensure that deflation is conquered, he said.

Honda said Abe remained neutral on a sales tax decision. He added that postponing the planned tax hike won't cause a loss of market confidence in Japan's public finances, but it would rather help boost share prices because such decision would be seen supportive for the economy.

Earlier, Japan's trade data was released with both positive & negative interpretations.
Reuters reported 6.exports in September expanded at the fastest pace in 7 months by 6.9% annually due partly to yen's weakness. However, imports climbed sharply to 6.2 % (vs forecast of 3.0%) due to weak yen.
Therefore, yen's weakness works in favour of the Japanese exporters but against importers. The trade balance came to a deficit of 958.3 bln yen (8.96 bln USD) vs estimated 777.0 bln yen deficit.

Under performing exports have been one of the weak links in the Japanese economy, which is struggling to cope with an Apr hike in the sales tax to 8% fm 5%. Japan's economy shrank an annualised 7.1% in the 2nd quarter, with the tax hike causing the biggest contraction since the 2009 global financial crisis.

The economy is forecast to resume expansion in the 3rd quarter, but the pace could be very slow, which would fuel speculation that the gov't will delay a second sales tax hike to 10% scheduled for next year.