- Kazuhiko Ogata, the chief Japan economist at Credit Agricole SA.
Is the economy strong enough to withstand the tax hike? It seems that Kuroda is overconfident about the current state of the world's third largest economy, as a sharp drop in machinery orders suggests companies are not willing to make huge purchases. Business investment in Japan is stalling and the economic growth will remain tepid for the most of the year following April's tax increase.
The Cabinet Office downgraded its view of business investment in 16 months, adding more pressure on Shinzo Abe, who pledged to bring Japan to a strong, private sector-led, sustained growth that is not boosted by constant injections of economic and monetary stimulus. The downbeat data was provoked by a 8.8% drop in the core machinery orders for the month of February. Analysts forecasted only a 2.6% decline, suggesting companies are even more concerned about future prospects. On a yearly basis, however, orders rocketed 10.8%. It means that Shinzo Abe's measures have improved situation and boosted growth following decades of stagnation and deflation. The outlook, however, is not so bright, as policymakers refrained from additional stimulus, suggesting they will wait for more data. Earlier this week the International Monetary Fund said Japanese economy will decelerate to 1.4% this year following a 1.5% expansion seen in 2013.
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