Japan Market Outlook
Economic data in Japan improved in 2013 steadily and signaled already at an early stage a strong economic recovery of the Japanese economy. Both, the Purchasing Manager Index (PMI) and the Small Business Confidence Index rose for example in November to the highest level since 2006. The current level of the PMI is consistent with a growth rate of GDP of around 3% in the fourth quarter.
The outlook for 2014 remains positive, in our view, because the combination of easy monetary policy, a weak yen exchange rate and stronger exports can carry the upswing for some more time. Even the increase of the sales tax from 5% to 8% in April 2014 will probably cause only a temporary growth slowdown. The upswing has gained a lot of momentum of its own and is thus difficult to derail. Moreover, the Japanese government has decided on fiscal countermeasures to smooth the negative effects of the sales tax increase over time. A good example is Germany, where the increase of the sales tax in January 2007 caused only a minor and temporary growth slowdown – mainly due to the strong momentum of the German economy at that time.
Opportunities for European Investors in Japan
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