Japan To Raise Sales Tax – Consumers To Slow

Brilliance out of Japan as we see the country’s standard “sales tax” raised from 5% to a staggering 8% here for the beginning of April.

This is very likely going to cause a considerable downturn in consumer spending for the coming quarter as the BOJ finds itself “ounce again” in a very precarious position.

In April 1997, when the government last raised the sales tax, to 5% from 3%, consumption took a dive and along with the effects of the Asian financial crisis, pushed Japan into deflation and a recession that lasted more than 18 months.

Now after 16 months of printing money like there’s no tomorrow, an increase in sales tax hardly sounds like part of a “cohesive plan” but this is not at all uncommon in Japanese central planning.

It’s one step forward ( if you consider rampant currency devaluation a step forward ) and two steps back as consumers tighten their belts and plan to cut back on spending.

We’ll keep a watchful eye on the Nikkei as always, along with those pesky JPY pairs that still refuse to budge.

 

 

11 Responses

  1. Careydina March 31, 2014 / 7:33 am

    Will AUD/JPY go to 96? 🙁

    • Forex Kong March 31, 2014 / 7:44 am

      Hi Carey….hey – are you looking at some longer term charts? like a daily chart for the last couple years?

      95.67 area is the high going back as far as Sept 2013 so..

      Today’s “morning ramp job” is all JPY as it’s the last day of the quarter “before” the new taxes kick in start of April.

      Yen has been pounded as I feel the BOJ is doing all it can prior to the next quarter not looking so good.

      • Forex Kong March 31, 2014 / 7:49 am

        As well tonight is the RBA rate announcement / statement etc so….

        I assume “as markets are absolutely brutal here” that things are ramping into the announcement.

        AUD futures have “swung high” as of Friday with weakness today as well.

        Brutal I know….absolutely brutal action.

      • Careydina March 31, 2014 / 7:51 am

        Yeah AUD/JPY keep going up… I waiting this pairs pay me soon… have been long… more than a month…

      • Careydina March 31, 2014 / 8:06 am

        Do you think RBA will raise the rate? I don’t think so, probably remain…

        • Forex Kong March 31, 2014 / 8:21 am

          No no no…….they won’t raise rates but – hopefully we can get some kind of market reaction to the “downside”.

          This all adds up pretty good with respect to both “price and time”…end of quarter/no rate hike/heavy Yen pressure etc….

          Let’s give it until tonight.

      • Careydina March 31, 2014 / 8:28 am

        Kong,

        You know what.. I thought of short a big one hehehe… But yet i didn’t.

        • Forex Kong March 31, 2014 / 8:36 am

          No no no no……this thing is currently taking out all kinds of traders as it continues to hang at the highs.

          If you want to “add” to your existing position WAIT until we get a clear turn on at least a 1H and even a 4H chart.

          Believe me – I’ll let you know as this trade is testing my patience as well.

          The news out of Australia hasn’t been “so good” but for whatever reason these past few weeks…the commods have really spiked higher.

          In my view its more “pump job” type activity as we’d have to consider the next larger move in risk in general being “down” so what better thing to do first than to get things pushed higher. Frustrating I know …..so – we just keep on hanging in.

      • Careydina March 31, 2014 / 8:49 am

        Yeah i know I know. That’s why i didn’t. Yep why commods has been high lately?

        • Forex Kong March 31, 2014 / 9:09 am

          Apparently the media machines and the continues “spin” that everything is going well is working it’s magic here.

          Amazing how JPY gets smacked and Nikkei rallies when recent data looks like this ( a quick cut and paste )

          These are “misses/worse data” than needed out of Japan:

          PMI (dropped again)
          Industrial Production (huge miss)
          Household Spending (huge miss)
          GDP
          Current Account Balance (huge miss)
          All Industry Activity
          Capital Spending
          M3
          Machine orders YoY (growth slowed)
          Trade Balance (huge)
          ECO Watchers Survey
          Leading Index
          Labor Cash Earnings (big)
          Bank Lending
          Exports

          Japan is hooped, U.S is broke, EU a total mess, China now slowing, trouble with Ukraine/Russia and even N and S Korea have started lobbing missles at each other this morning!

          Yet everything is going great!

      • Careydina March 31, 2014 / 9:24 am

        Sounds horrible! AUD been not doing well too. As well as kiwi has been going to north too. Both currencies ot supposed as this high. Weird.. getting scratch on my head. I think i should have focus more on technical than fundamental for this year.

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