Japan has axed its GDP growth forecast for 2016
The Japanese economy is going to grow at a far slower pace than was previously thought this year, and no, it's not because everybody in the country is too busy playing Nintendo's Pokemon Go to get anything else done.
The Japanese Cabinet Office has reduced its forecast to 0.9 per cent, down from the 1.7 per cent that was projected in January.
The inflation forecast was also downgraded to a rise of 0.4 per cent, versus an earlier projection for 1.2 per cent.
The economic and fiscal policy council put the revision in GDP growth down due to the delay in imposing a new consumption tax – raising it to 10 per cent from the current eight per cent, which postponed expected last minute buying.
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Prime Minister Shinzo Abe – whose economic policies have been dubbed Abenomics – said last month he is pushing back the planned consumption tax hike to October 2019 from April 2017.
Last-minute demand was expected to occur towards the end of fiscal 2016, which ends next March for Japan, and boost Japan’s gross domestic product for the year.
This eleventh hour surge will now not happen until before the tax is raised in 2019.
Meanwhile, Asian equity markets have rocketed today as investors bet on further imminent economic stimulus from Japan and after China reassured the market it was on course to hit its growth targets.
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The Nikkei rose as much as 2.2 per cent in early trading but fell back by the close, ending around 0.8 per cent higher.
The top Japanese index has now reversed all the losses it racked up following the UK vote to quit the European Union. The Nikkei is up 7.4 per cent for the week.