Since the new Prime Minister Shinzō Abe was elected for this position, the Japanese citizens knew that they chose the right person in order to see radical changes implemented. Thus, the approach of Shinzō Abe consists of enlarged fiscal and monetary stimulus as well as important structural improvements in the Japanese economy. It is known from the beginning that the main target is to overcome the deflation, to solve the issue of the national debt and to sustain the economic growth of the country.
As lately we heard rumors about a possible increasing in the sales tax, now it was confirmed that it will be raised from 5% to 8% (the first increase since 1997) in April 2014. Is expected this change to go further and to have the sales tax increased to 10% in 2015. As the tax increase is aimed to gather 8 trillion yen a year, this measure is thought to be needed in order to rein Japan’s public debt and help reduce the budget deficit which now reached 10% of GDP. As the sales tax increase is strongly affecting the Japanese citizens, Prime Minister Shinzō Abe is expected to come with a solution. The key is expected to be announced later this year and consists of an additional $50 billion stimulus package in the first year of having the citizens bearing the raised costs.
Speaking about the new stimulus package, economists believe it is actually necessary to have it. Moreover, it is expected to have it operating in the infrastructure sector and most of the fields correlated with it. Also by the end of the year we will have a decision taken in relation with the corporate tax. As it is considered that the Japanese corporate tax is one of the biggest, reducing this tax is seen as a boost in the business environment and an encouragement for economic growth.
Considering all the above mentioned changes, we can say that important steps are taken and indeed “Abenomics” is pointing towards a direction. All that is being left is to wait and see to what extend these changes will impact the real economy.