What impact will the delay in the sales tax hike have?

The direct impact of Prime Minister Abe’s decision to delay next year’s sales tax hike is to boost the outlook for growth and also for underlying inflation, though headline inflation will of course be lower. We still expect inflation to fall short of the 2% target over the next two years, so more monetary stimulus is still likely to be needed. But the postponement of the tax hike could strengthen opposition to bolder easing within the Bank of Japan.