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More update on the Abenomics...

Wounded Japan PM grapples with tax jinx after BOJ eases

TOKYO - When Prime Minister Shinzo Abe raised Japan's sales tax from April, he was betting he could break a jinx that has doomed leaders who raised the levy to losing their jobs.

Now, wounded by cabinet scandals and growing doubts about his radical "Abenomics" prescription to revive an economy scarred by years of deflation, Abe must decide whether to roll the dice again.

A shock move by the Bank of Japan on Friday to expand its massive asset-buying stimulus program - in the hope it will stoke inflation - could boost the chances of a rise in the unpopular levy from October, especially if followed by promises of added fiscal stimulus to help offset the pain.

But concerns that his popularity has peaked and worries about the election calendar are certain to weigh as heavily as economic data when Abe decides in coming weeks whether to press ahead with a planned rise to 10 percent.
...
http://www.todayonline.com/business/woun...-boj-eases

It is a question of confidence and trust, both the consumers and corporations...

Cheaper tomorrow? Bank of Japan battles entrenched 'deflation mindset'

TOKYO - Bank of Japan Governor Haruhiko Kuroda does not need to convince Japanese people like Kazue Shibata that deflation brings problems, but getting them to believe that higher prices will make things better is proving to be a harder sell.

Shibata, 65, who runs a small dress shop in central Tokyo, worries the BOJ's mission to hit a 2-percent inflation target could end up driving business away unless people also have more money in their pockets.

"If prices rise, people might not buy as much," she said, echoing a concern of many private-sector economists.
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http://www.todayonline.com/business/chea...on-mindset

Some insight on the different "classes" of workers in Japan, and relaxing labor laws.

TT-779 -- Labor Law Changes to Create New Underclass? E-biz news from Japan.
Submitted by Terrie Lloyd on November 3, 2014
http://www.japaninc.com/tt779_labor-law-changes

As we think has become obvious, Japan is undergoing a massive labor
sea-change, and is creating two classes of workers -- the privileged
and the rest. The events spurring these changes are both oblique, such
as the transfer of wealth from the general public to the government
and those close to it (Abenomics) and the establishment of special
zones that will coincidentally negate traditional labor laws, as well
as more obvious ones, such as actual legislation to let employers fire
their staff at will.

Whether these changes are good or bad depends on where you are in the
food system. If you have investment assets and savings, a full-time
job with an exporting firm, or are employing others, then the economic
and legal ground shift is probably going to be good for you. If you're
a lower-paid but full-time Taro in a factory, then cost of living will
go up and you'll be fighting to stay on the good side of your
employer. At the bottom of the hierarchy, if you're an irregular
worker in a service industry -- then mostly it's going to be bad news:
low wages, uncertain tenure, and perpetually being an outsider.
...

Faber: Japan Is Engaged in a Ponzi Scheme
http://www.bloomberg.com/video/faber-jap...Vh0~w.html


http://investideas.net/forum/viewtopic.php?f=42&t=6722

PM Abe has less confidence his next move. It is definitely not a good sign for Abenomics...

Japan's Abe to postpone tax hike, call December election: media

TOKYO - Japanese Prime Minister Shinzo Abe will postpone a planned tax increase and call a general election for December, a newspaper said on Wednesday, in what would be the biggest shift in Abe's economic policies since he came to power two years ago.

Abe said on Tuesday he had not decided on the timing of an election. But the conservative Sankei newspaper said he would delay the increase in the national sales tax by a year and a half to April 2017 and call a snap election for the Lower House of Parliament.
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http://www.todayonline.com/world/japans-...tion-media

Abenomics is having headwind...

Instant View: Japan third-quarter GDP shrinks, Abe likely to delay tax hike

TOKYO - Japan's economy unexpectedly shrank an annualized 1.6 percent in July-September after a severe contraction in the previous quarter, likely solidifying the view that premier Shinzo Abe will delay a second sales tax hike next year.
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http://www.todayonline.com/business/inst...y-tax-hike

Japanese had it tough for almost 2 decades so this is small storm that will pass.

In Abe we trust.

GG

(17-11-2014, 11:19 AM)CityFarmer Wrote: [ -> ]Abenomics is having headwind...

Instant View: Japan third-quarter GDP shrinks, Abe likely to delay tax hike

TOKYO - Japan's economy unexpectedly shrank an annualized 1.6 percent in July-September after a severe contraction in the previous quarter, likely solidifying the view that premier Shinzo Abe will delay a second sales tax hike next year.
...
http://www.todayonline.com/business/inst...y-tax-hike

Taxing times for Abe
By
Andy Mukherjee
Japan's surprise recession has clouded its fiscal future. Data released on Nov 17 showed the country's output has fallen for a second straight quarter. PHOTO: AFP
18 Nov5:50 AM
Singapore

JAPAN's surprise recession has clouded its fiscal future. Data released on Nov 17 showed the country's output has fallen for a second straight quarter. Once again, the modest 3 percentage point increase in Japan's sales tax rate in April was the culprit. The fragility of private demand not only rules out a planned second increase in the levy next year, but also reduces the chances that future politicians will bite the fiscal bullet. Taxing consumers to shrink the government's huge debt load is a fast-receding dream.

Economists had hoped for a 2.1 per cent rebound in GDP in the third quarter following the 7.3 per cent contraction between April and June. Yet this failed to materialise despite the government boosting public investment. GDP shrank by an annualised 1.6 per cent.

The disappointing report means Prime Minister Shinzo Abe is almost certain to delay plans to raise the sales tax to 10 per cent next October, from the current 8 per cent. He may also call a snap election in an effort to pre-empt any challenges to his leadership of Japan's ruling Liberal Democratic Party.

It's unclear what other plans for fiscal correction Mr Abe may propose. A lack of any revenue-raising measures could be troubling for a country whose ratio of government debt to GDP is approaching 245 per cent, the highest among rich nations.

For now, the government can issue any amount of fresh IOUs because the Bank of Japan is buying assets by the truckload. But the BOJ's bond-buying won't continue forever. Once it ends, the government won't have too many levers to quickly boost revenue and reduce its reliance on deficit financing. Japanese labour taxes are already high by OECD standards, while the Abe administration wants to cut corporate taxes to revive private investment. That leaves higher duties on consumption as the only way for an ageing society to fulfil its massive social-security commitments.

However, this is the second time that a modest sales tax increase has tipped Japan into recession. If Abe leaves the task unfinished, future Japanese politicians will be even more reluctant to risk their political capital chasing the chimera of fiscal correction.

PM Abe has to decide on his next move...

Abe set to win election but reforms hard to push through - Bank of Singapore

SINGAPORE (Nov 18): Japanese Prime Minister Shinzo Abe should have no problems winning a snap election should he call for one, but a victory is unlikely to boost his structural-reform programme for revitalising the world's third-largest economy, says Bank of Singapore chief economist Richard Jerram.

"We have to be doubtful about claims that a big election win will re-ignite Abe’s structural reform programme," he said in a note today.
...
http://www.theedgemarkets.com/sg/article...-singapore

BoJ upbeat on economic outlook
DOW JONES NEWSWIRES NOVEMBER 19, 2014 9:15PM

The Bank of Japan has kept its upbeat economic view despite data showing the country had slipped into recession

Following a two-day meeting, the BoJ stood pat on monetary policy -- after expanding its already huge stimulus package last month -- as markets eyed governor Haruhiko Kuroda's reaction to Tokyo's announcements.

But Kuroda -- Prime Minister Shinzo Abe's handpicked central bank chief -- said little about the issue at a post-meeting press briefing on Wednesday, despite earlier calls for Tokyo to press on with tax rises aimed at generating fresh revenue to trim an enormous national debt.

"I'm not going to comment on a decision made by the government," Kuroda told reporters.

"But, generally speaking, it's important to maintain confidence in Japan's finances. I still expect the government will implement measures" to pay down the debt.

He also dismissed suggestions that the BoJ's move to expand its vast easing plan was based on the assumption Tokyo would lift the country's taxes next year.

"I never thought we should have waited more before expanding our monetary easing," Kuroda said.

Tokyo's decision - and Abe's call on Tuesday for a snap election ahead of a party leadership vote next year - came after a sales levy hike in April slammed the brakes on growth just as the deflation-plagued economy appeared to be turning a corner.

The perennially optimistic Kuroda echoed a BoJ statement earlier on Wednesday which said the world's third-largest economy was still on track for a recovery.

Despite its bullish view, however, the central bank was more cautious on inflation expectations, saying that they "appear to be rising on the whole from a somewhat longer-term perspective".

"While board members noted that some weakness on the production side remained, they upgraded their views on exports, housing investment and private consumption," said Marcel Thieliant from Capital Economics.

"However, the BoJ now expects inflation to remain at current levels of 1.0 per cent for the time being, rather than to pick up as in previous statements."

Thieliant added that "the statement suggests additional stimulus in the near-term is not on the cards".

Tsuyoshi Ueno, a senior economist at NLI Research Institute, was surprised at the bank's upbeat tone.

"The growth data have been negative for two quarters in a row, which shows that the economy is in a bad state," he said.

"It seems a bit strange that the central bank kept its view that Japan's economy is recovering."

In forex markets, the yen weakened further with the US dollar at a seven-year high of Y117.38 after the announcement, up from Y116.83 in New York.

The BoJ's decision means it will keep trying to pump cash into the banking system at an annual pace of Y80 trillion ($A844.37 billion), a scheme designed to stimulate the economy.

Last month, the bank surprised markets by announcing it would expand asset purchases by as much as Y20 trillion annually to the current level, sending the yen into freefall.

It also slashed its economic growth forecast by half and trimmed consumer price expectations as a much-touted 2.0 per cent inflation target looked increasingly out of reach.

The GDP data on Monday showed Japan's economy shrank 0.4 per cent, or at an annualised rate of 1.6 per cent, in the July-September quarter, dealing a huge blow to Abe's bid to turn around years of tepid growth, dubbed Abenomics.

The reading was well below market expectations for a 0.5 per cent expansion, and comes after Japan suffered a 1.9 per cent contraction in the April-June quarter - or 7.3 per cent at an annualised rate - as consumers and firms capped their spending.