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USD/JPY sensitive to consumption taxes - Nomura

FXStreet (Guatemala) - USD/JPY is tentative to the consumption tax environment in Japan and Yujiro Goto, analyst at Nomura is looking for a hike.

Key Quotes:

“We still believe the government will raise the consumption tax rate as scheduled, but media reports and expected weak Q3 GDP growth, released next Monday, could increase market volatility over the next few weeks, and we should monitor developments closely (see “Forecasting +1.4% q-q annualized”, 31 October 2014)”.

“Reuters reported that if the rebound in Q3 GDP growth, after the sharp decline in Q2 owing to the tax hike (-7.1% q-q saar), is around the 2% level, the likelihood of a delay in the tax hike increases, citing an unnamed person close to the PM Abe (unconfirmed)”.

“If +3% or higher Q3 growth is required to avoid a delay in the tax hike, as the Reuters article says, it will be difficult to avoid a delay, as we estimate growth to be just +1.4%. We would assign at least a 30% chance of a snap election by year-end”.

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