5 min read 

To many in Japan, the Cherry Blossom season is a symbol of rejuvenation of nature and the start of Spring. Bringing in around 5 million tourists from all over the world, boosting the economy by around $2.7 billion.

Though, even with such symbols of renewal and growth, the Japanese economy is anything but flourishing and many fears surround Japan and their already fragile economy.

In October last year, Prime Minister Shinzo Abe declared the government has made the decision to increase the consumption tax, from 8% to 10%, in October 2019.  

Prime Minister Shinzo

Yet, many people blame the last tax hike in Tokyo back in April 2014 for descending the country to a brief recession.

Despite all the data, the Japanese Prime Minister Shinzō Abe (LBC) is fervent about the tax levy saying “Through this tax rate hike, we will not only achieve fiscal consolidation over the medium- to long-term, but also realize inclusive growth”. Meaning, a portion of the funds to be put aside to ensure free early-childhood education, and to help with the looming social security costs.

Though, Heizo Takenaka, who served in the administration of former Prime Minister Junichiro Koizumi, noted that, “Of course a sales tax hike would increase the possibility of a recession,” and went on further to comment on how difficult this year it was to manage the economy of Japan this year.

“The largest problem Japan’s fiscal debt faces is its social security conundrum,”

Mr Takenaka believes that Japan should try giving structural reform another try. He commented that this tax levy will only hamper the efforts to bring stable inflation and may put the economy at risk.

It is worth noting that this tax hike has been postponed twice by Prime Minister Shinzo Abe, and with Prime Minister Abe embracing his final three-year term, a lot of pressure is mounting up to bring stability to Japan and combat the ballooning social security problem. Prime Minister Abe also said the government go ahead as scheduled with the raise in the consumption tax next fall, unless “significant economic turmoil occurs”.

JPY at a glance

Also this week, The United States will be attending meetings to discuss new U.S. – Japan trade agreements. According to U.S. Treasury Secretary Steven Mnuchin, a new currency manipulation rule will be included to cancel currency manipulation to gain unfair advantage.

The United States have long argued that China were working to artificially keep their currency low in order to gain advantage for cheaper exports. These new discussions being held by Japan and the US, will be covering a “broad agenda” with financial fair play in mind, ensuring that manipulation is acknowledged and eradicated.

However, many analysts believe this meeting has established from growing pressure from American farms,who were completely cut from Japan and other Asian importers, due to the President Trump withdrawing from the Trans-Pacific Partnership back in January 2017.

So, be sure to find out the outcomes of the meetings, and how they will affect both US and Japanese Economy.

Information regarding past performance is not a reliable indicator of future performance.

Trade now