Japan's Stocks Tanked And Now A Snap Election Seems Even More Certain
REUTERS/Kim Kyung-Hoon
That's a strong signal that the tax hike that was brought in earlier this year by prime minister Shinzo Abe has had a bigger impact on the economy than expected.
The Nikkei has had a roller coaster year already. In the middle of October's global sell-off, it was down more than 9% on the start of 2014, followed by an explosion to a 7-year high as the Bank of Japan supercharged its QE programme.
Abe doesn't seem too happy with the state of the current tax hike, and even less happy with what comes next: in less than a year, there's meant to be another increase, which would bring the tax to 10%.
The increases were agreed in a landmark political deal in 2012, before Abe came to office, and it seems he may be about to call a snap election and run again on a platform of calling the hike off. Here's what Societe Generale said even before the awful readings came out:
The predicted Japan Q3 GDP growth of 0.5% quarter-on-quarter should be weak enough to persuade PM Abe to postpone the second Consumption Tax hike, planned for October 2015, and probably call an early general election as well.
If 0.5% growth was weak enough to prompt the election, a 0.4% drop almost definitely is. And according to Chris Scicluna at Daiwa Capital Markets, Abe and his LDP party are likely to win again.
Tomorrow, the Prime Minister will be briefed about the conclusions of Economy Minister Amari's recent 'expert' discussion panels on the consumption tax hike. And, if the media is to be believed, that will lead him subsequently to call for a delay to next year's consumption tax hike and announce a snap general election - most likely to be held on 14 December. Given the opposition's disarray, the main question then will be related simply to the eventual size of the ruling LDP's majority.
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