|09-15-2014, 04:17 PM||#1|
Japan`s economy needs 5 trillion yen of stimulus measures before another tax hike
After the Japanese economy contracted more than expected in the second quarter of this year, economists believe that the economy will not be able to withstand a new sales tax hike without pumping new monetary stimulus into the financial system.
The government will need 5 trillion yen ($47 billion) to be introduced to the market, in order for the economy to bear the impact of raising sales tax from 8% to 10%. The govenrment shall make its final decision about raising sales tax by the beginning of next year.
Furthermore, Japan`s Finance Minister Taro Aso signaled that the government is preparing a "back up plan" before making the final decision concerning the new tax hike. Yet, Haruhiki Kuroda, the Governor of the Bank of Japan said earlier that the bank is not at a point where it can consider additional stimulus, since inflation is heading towards its target of 2%.
The final reading of Japan`s Gross Domestic Product (GDP) showed the economy shrank 1.8% in the second quarter of 2014 compared with a previous contraction by 1.7%, and the reading met analysts` estimates.
On the yearly record, the GDP contracted 7.1% in the quarter ended June, following a contraction by 6.8%, and the reading came worse than median estimates that referred to a 7.0% contraction.
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