- Shuichi Obata, a senior economist at Nomura Securities Co.
The Bank of Japan is expected to stay pat on its monetary policy this week, and will most probably, offer a brighter outlook for overseas economies. At the same time, the government released a draft version of its growth strategy, without providing any details on the planned reforms. While the central bank is still reluctant to make any changes in the monetary policy, it seems that the government will push for the growth-oriented corporate tax reform. Companies in the world's third largest economy are focusing on the corporate tax cuts that are expected to begin from the fiscal year starting in April 2015. Japan's stocks have plummeted since last June, as Shinzo Abe failed to deliver a detailed growth strategy that would satisfy investors. This time he is facing a serious problem to ensure promised reforms on tax, labour and immigration in order to avoid a further decline in stock prices. The latest announcement and a draft plan, however, offer little support to markets. Politicians will still have to decide the size and timeframe of the planned tax cuts, as well as consider alternative sources of revenue.
Also Wednesday, a report from the Ministry of Finance and the Economic and Social Research Institute showed that the nation's big manufacturers turned more pessimistic about the economic conditions between April and June. A gauge of sentiment among large manufacturers fell to –13.9 in April-June, following a reading of +12.5 three months earlier.
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