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Japan: Economic boost, but policy implementation risks – Nomura

FXStreet (Barcelona) - Research Analysts at Nomura comment on the increasing likelihood of consumption tax hike being postponed, snap election, but see it to boost the economy in near term.

Key Quotes

“We think postponing the consumption tax hike would boost the economy in the near term. We had been forecasting real GDP growth of 1.8% and 1.2% y-y for FY15 and FY16, respectively, but we now make provisional growth forecasts of 2.0% and 1.5%, respectively, on the assumption that the consumption tax hike will be delayed until April 2017.”

“As for the inflation rate based on the core CPI, although we see no major change in terms of the underlying figure minus the impact of consumption tax hikes, our inflation rate projections for FY15 and FY16 including these hikes fall from +1.7% y-y for both fiscal years to +1.1%, again for both fiscal years. We assume public investment will be lower than our previous assumption as it would no longer be necessary to respond to the FY15 consumption tax hike.”

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