- Takehiro Sato, Bank of Japan board member
Japan's economists have been examining the strength of the world's third largest economy for months before giving a green light for Shinzo Abe to make the first tax hike since 1997. It seems they were right in their assessments as following almost two months there are signs the economy is weathering the drag relatively well.
The Bank of Japan officials have been surprisingly confident about the strength of economy, with some people close to officials saying policymakers are confident no additional stimulus will be required. Moreover, the economy will be able to develop with much help from exports. Abenomics have led to a significant depreciation of the Yen, a measure, which in theory, should have boosted shipments. Nevertheless, the failure of exports to build momentum has been one reason some experts have been betting the Bank of Japan will pull the trigger again to open the monetary tap. For now capital investment has been climbing higher, while concerns about deflationary pressure have dissipated in recent months. Despite the fact Japan is highly dependent on its exports, some economists claim even if shipments remain listless, there is little risk the economy will slip into a negative feedback low. While this is only a view of one of the central bank's members, it can raise the possibility other members will also signal a departure from previous stance that expansion in both exports and business investment is vital to achieve the 2% inflation target.
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