What to expect from post-tax hike data

If Japan’s past experience is any guide, the next few weeks will deliver a run of downbeat data reflecting a plunge in domestic demand after the consumption tax hike. In fact, many indicators have already started slowing. Retail and vehicle sales are likely to fall sharply in Q2 and industrial production should weaken too. But we continue to expect a rebound in activity in the second half of the year. Indeed, some forward-looking surveys are already pointing in this direction and more may follow soon.