Japan: Stronger GDP does not changes the trajectory of policy - BBH

Research Team at BBH, suggests that Japan is in a different position and they do not think the stronger than expected Q1 GDP changes the outlook for the trajectory of policy.

Key Quotes

“Preliminary estimates of Japanese GDP (like US GDP) are often subject to statistically significant revisions. It is not a solid foundation on which to build policy.

The Abe government is reportedly preparing a fiscal package, in addition to the earthquake relief measures that were approved by the Diet last week. The lack of fiscal consolidation will not deter the additional BOJ easing. Indeed, coordination of fiscal and monetary is the traditional LDP policy prescription.

Reports from the G7 meeting indicate that Finance Minister Aso informed US Treasury Secretary Lew that Japan will go ahead with the planned hike in the retail sales tax next April (from 8% to 10%). Previously there have been reports and speculation that the sales tax increase would be postponed. The impact of the sales tax increase will likely be blunted by additional fiscal measures.”