Japan growth forecast raised as consumption tax hike delayed

SINGAPORE - S&P Global Ratings today raised its real GDP growth forecast for Japan in 2017 to 1.0% from 0.4% earlier, reflecting mainly the postponement of the second installment of the consumption tax hike. Prime Minister Abe has announced that the tax hike to 10% from 8%, scheduled for April 2017, has been pushed back to October 2019.

S&P has also lowered its 2017 annual headline inflation forecast for Japan by almost a full percentage point to about 1%.

"Postponement of the consumption tax hike increases household disposable income next year, and is therefore positive for near-term expenditure and growth," said S&P Global Ratings Asia-Pacific chief economist, Paul Gruenwald.

"It also lifts a cloud of uncertainty over the timing of the policy move,
which had arguably affected confidence and had held back investment."

“We would reiterate our view that the previous installment of the tax hike to 8% from 5% in early 2014 was premature. It was implemented before the economy had sufficient momentum to absorb the tax hike. In the event, a recession ensued.” www.sstandardandpoors.com (ATI).