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Currency Analyst since 2010

JPY, Japan and the tax problem

Japanese yen weakened today as Japanese newspaper said that the nation’s government is considering a corporate-tax cut a counterweight to consumption tax. Japan is considering raising the consumption tax by 3 percentage points next year to rein in a national debt which exceeds GDP in more than 2 times.

Societe Generale: “If we do get a good raft of structural reforms, including a corporate-tax cut that would lift the dollar higher versus the yen over the course of the year.”

Data today showed that Japan’s core machinery orders fell less than expected (-2.7% vs. -7.2%). However, analysts are still concerned that that corporate investment weakness may not have hit the bottom.

Mitsubishi UFJ Morgan Stanley Securities: “Company managements’ mindset may not have recovered to the same level as the market’s one. When capital spending shows a recovery, that's when we are comfortable with saying that the economy is recovering.”

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