Japan’s new policy mix

Japan revised its Q3 GDP growth up from 0.2% to 1.8% qoq ann. Accordingly, we lifted our 2019 GDP forecast slightly up to 1.1%. After the October sales tax hike from 8% to 10%, indicators have come in mixed. The BoJ’s Tankan survey showed business confidence at large manufacturers dropping. We continue to expect a negative GDP growth rate in Q4.

Highlights:

  • Japan revised its Q3 GDP growth up from 0.2% to 1.8% qoq ann. Accordingly, we lifted our 2019 GDP forecast slightly up to 1.1%.
  • After the October sales tax hike from 8% to 10%, indicators have come in mixed. The BoJ’s Tankan survey showed business confidence at large manufacturers dropping. We continue to expect a negative GDP growth rate in Q4.
  • In order to minimize the risks after the tax hike but also to avoid a cliff edge after the Tokyo Olympics next summer, PM Abe announced a stimulus package with a headline figure of JPY 26tr (4.7% of GDP). Actual fiscal measures will be much lower with JPY 13.2 tr and the impact on the economy even smaller. We revised our growth outlook upwards to 0.6% next year.
  • With the new policy package, Japan shifted to a new policy mix. We expect the BoJ to hold its monetary policy constant on its next meeting (December 18/19) and at least during the next year.

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JAPAN’S NEW POLICY
MIX

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