Sales tax hike fails to sink economy

11 June 2014 By Andy Mukherjee

The Breakingviews Abenomics Index dipped slightly in April. Consumption wobbled, but wages, lending and housing starts held up. With the economy weathering the 3 percentage point increase in the sales tax, expectations of more money-printing by the Bank of Japan are receding.

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The Breakingviews Abenomics Index declined marginally to 95.97 in April, from a revised 96 in the previous month.

Five of the 10 constituents of the overall gauge fell.

With Japan’s sales tax rate increasing by 3 percentage points from April 1, retail prices jumped higher, causing consumption to plunge. Manufacturing production also weakened and inflation expectations dipped. Stock prices declined, and bond yields hardened.

Housing starts, bank lending and wages improved from the previous month, while the current account swung to a surplus.

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