This week brought more evidence that consumers rushed to bring forward spending ahead of the tax hike that took place on Tuesday. Meanwhile, capacity shortages are diminishing and firms are becoming less willing to invest. But the Bank of Japan is most worried about a worsening global economy so the continued improvement in the global manufacturing PMI is a positive sign. On balance, we reiterate our forecast that the Bank of Japan will refrain from cutting the policy rate at the end of the month.
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