"The question for BoJ policy is now whether governor [Haruhiko] Kuroda will support the government by adding easing to counter the expected fiscal drag at the beginning of next year"
-Miwako Nakamura, analyst at JPMorgan
Optimism among big Japanese producers soared to the highest level in four years in the third quarter on the back of improving earnings, reinforcing a view the world's third largest economy is strong enough to withstand the planned hike in consumption tax. Japanese Ministry of Finance unveiled a report showing the business survey index, or BSI, stood at +15.2 in July-September period, more than three times higher than 5.0 recorded in the previous quarter. This reading marks the highest level since the same quarter in 2009, another signs that widely discussed Abenomics are spreading across the country. The BSI index reflects the percentage of companies that expected the business conditions to improve in the upcoming months minus the number of companies that expect it to deteriorate. Meanwhile, this measure is expected to worsen slightly in the last quarter of this year, falling to 13.5.
Earlier this month the Cabinet Office showed Japan's gross domestic product expanded 0.9% during the period, translating into an annualizes growth of 3.8%. Buoyed by the evidence of a brighter economic outlook and the fact Japan will host the 2020 Olympic Games, Shinzo Abe is likely not to waste any time in preparing the groundwork for a planned hike in the national consumption tax. Furthermore, he has already requested stimulus package is adding to signs the decision is already made.
© Dukascopy Bank SA