Japan’s economic recovery should be able to weather last month’s consumption tax hike, helped by improvements in investment and in net exports. But the bigger picture is that years of fiscal tightening and painful structural reforms lie ahead. In the meantime, inflation (excluding tax effects) looks set to fall short of the central bank’s 2% target. The Bank of Japan (BoJ) will therefore still have to play its full part in supporting “Abenomics” by providing additional monetary stimulus.
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