- Marcel Thieliant, Japan economist at Capital Economics
Japan's Prime Minister Shinzo Abe is likely to delay the second sales tax and call a general election before the end of the year. Earlier in 2014, a sales tax hike seriously hit consumer sentiment, and sent Japan's Yen lost nearly 13% in the first three quarters of 2014. Japanese companies would welcome such a decision, as they are increasingly worried about the potential of the rate hike derailing fragile economic recovery in the world's third biggest economy. The majority believes that the economy is too weak to weather the lift as planned in October 2015.
Meanwhile, Japan's core machinery orders, a leading indicator of capital spending, increased for the fourth consecutive month in September and manufacturers become more confident, adding to signs the nation's economy is finally starting gather steam following the drag from the April sales tax hike. Core machinery orders soared 2.9% on month, beating expectations for a 1.9% drop, but slower than August's 4.7% increase. On an annual basis, machinery orders surged 7.3% in the reported month, overshooting predictions for a 1.3% decline. Machinery orders rose 5.6% on quarter for the July-September period, the second consecutive quarterly advance. Companies surveyed by the Cabinet Office expect that orders will fall 0.3% in the final quarter of the year.
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