- Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities
Japan's central bank and government will be constantly monitoring each set of fundamental data and every piece of puzzle will have a strong impact on markets as officials are assessing the potential impact of the tax hike on the economy. Nevertheless, the latest figures can be distorted and cannot reflect the real picture, as ahead of the tax hike both consumers and companies showed stronger willingness to spend. That is why the Japanese Yen was only little changed after a release of the upbeat retail sales.
A report from the Ministry of Economy, Trade and Industry showed that sales at Japan's retailers surged 11% on the yearly basis, expanding at the fastest pace in 17 years and stretching ahead of analysts' expectations which projected a 10.8% growth. Moreover, this is a significant acceleration from February's 3.6% growth. On a monthly basis sales advanced 6.3%, also accelerating from the previous month. Stronger-than-expected readings were widely anticipated by markets after policymakers announced in October 2013 that the sales tax hike would be increased by 3%, in order to draw down the government debt.
The jump in retail sales, however, is likely to be short-lived, as according to the latest consumer sentiment report, Japanese consumers have lost faith in the world's third largest economy.
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