Japanese economy
The Japanese economy is ranked as the third world's biggest economy. Although it has recently suffered from a technical recession, various measures are being laid down to counter any adverse effects. According to a financial report analysed by Mr. Jonathan Price Director of Mergers & Acquisitions with Tokyo based Nikko Holdings, the country's GDP has fallen by about 1.6 percent between the months of July and September contrary to the financial predictions of 2.1 percent. This decrease in GDP led to the reappraisal of 7.3% contraction in the second quarter. This situation marks the biggest fall since the earthquake and tsunami disasters that happened in the year 2011. Speculations are that the solution to this crisis could be a delay in sales tax increment.
Could be the delay in sales tax solve this economic problem?
Most analysts expect the Prime Minister to call for a snap election in the aim of facilitating a delay in the increase in the sales tax. The increase in tax is expected to amount to about 10% and was scheduled to kick-start in the year 2015.
The tax rise was initially planned by the preceding government in 2012, with an aim of dealing with the massive public debt the country was facing. The enormous government debt was the highest compared to other developed states.
According to Mr. Price from Nikko Holdings, a sales tax increment from 5% to 8% was implemented during the April month. This rise compromised the economic growth in the second quarter of the year. The effects are still being felt in the current economic status. The third quarter's economy decreased by about 0.4% compared to the preceding quarter.
Impacts on the private sector
The report also reveals that industry, which accounts for about 60% of the economy, was negatively affected by the move. Various economic indicators have already confirmed the weak economy is putting the intended sales tax rise into significant doubts.
A viable solution will be to call for a snap election. Based on some reliable reports from the local media, the Prime Minister could schedule for an election on 14 December. According to the government's spokesperson Yoshihide Suga, Mr. Abe must come up with a strategy that will offer a lasting solution to combat this economic situation.
Even though Mr. Abe popularity has decreased since he took the oath of office, he has a good chance of winning the election following the political divisions among the opposition. Mr. Price from Nikko Holdings commented that due to the unfavourable economic data the dollar has gained strength, rising to about 117 Japanese yen before going down and settling at 115.69. The Nikkei225 index closed 3% down at 16,973.80 making it the biggest drop since August.
Sources
Jonathon Price - Nikko Holdings
About
Established in 2006, Nikko Holdings is an independent, full-service brokerage, wealth management and business management provider dedicated to providing wealth preservation solutions from Asia to Europe for affluent individuals, families and Institutions.
Contact
www.nikkoholdings.com
