Ostrum
  • News & Chronicles
  • France
  • Euro Area
  • United States
  • International
  • Politics & Society
  • Monetary Policy
  • Media
  • Decoding
  • About Philippe Waechter
Philippe Waechter's blog
  • Insights
  • About us
  • Expertise
  • Our people
  • Media

Philippe Waechter's blog
My french blog
  • News & Chronicles
  • France
  • Euro Area
  • United States
  • International
  • Politics & Society
  • Monetary Policy
  • Media
  • Decoding
  • About Philippe Waechter
  • News & Chronicles
  • Climate
  • France
  • Euro Area
  • United States
  • International
  • Politics & Society
  • Monetary Policy
  • Media
  • Decoding
Philippe Waechter's blog
Prévôté
Previous Next
  • 2 min

Japan -The persistent impact of VAT rate hike is a drag for growth

  • 17 August 2015
  • Philippe Waechter
  • Business Cycle
Total
0
Shares
0
0
0

The Japanese GDP has retreated during the second quarter. It was down by -1.6% (annual rate) after +4.5% during the first three months of the year. Compared to last year, economic activity is up at 0.7% and carry over growth is at 0.4% for 2015 (carry over is the average growth for 2015 if GDP remains at Q2 level for the rest of the year).
The GDP profile is shown on the graph. I have added a trend calculated from 2000 to 2008 (in red). The main point to notice is the fact that the GDP in Q2 is at the same level than during the last quarter of 2013. The Japanese economy stagnates even with a very accommodative monetary policy. But fiscal policy has been brutal with the VAT rate hike (3 points) on April 2014. The impact is persistent and has dramatically changed the upward trend of the Japanese economy.
japan-2015-Q2-GDP-trendThe impact of this fiscal measure can be seen on households’ expenditures. Since the peak of the first quarter of 2014, expenditures are down and do not show any signs of improvement. Before this large shock, expenditures were well oriented and was a real support for GDP growth.
japan-2015-Q2-HH-expCompared to the previous VAT rate hike in 1997, the current one has a deeper and more persistent impact on households’ behavior.
Japan-2015-Q2-HHExp-compI have recently shown that world trade was not supportive for growth and that countries all around the world has to find in its own internal demand the driver of its growth (see here). Japan has made the contrary by weakening its households’ demand. As far as it persists in this way, the Japanese economy will remain on a low and bumpy growth profile.

Annex
The other components of demand are not able to compensate the weak consumption profile. That’s why it’s not easy for Japan to converge to an upward growth trend.
Japan-2015-Q2-GDP-Contrib

Related Topics
  • Business Cycle
Subscribe to the newsletter

All the news from Philippe Waechter’s blog in your mailbox


Loading
ABOUT PHILIPPE WAECHTER

Le magazine d’experts d’Ostrum

ABOUT OSTRUM AM
  • About us
  • Media room
  • Our publications
  • Cookie Policy (EU)
FOLLOW ME ON
EXTERNAL LINKS
  • Economists
  • Think tank
  • Central banks
  • Blog roll
©Ostrum AM 2023
An affiliate of : Plan de travail 2

Input your search keywords and press Enter.

Manage Cookie Consent
We use cookies to optimize our website and our service.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
View preferences
{title} {title} {title}