Confidence rises despite tax hike

Bloomberg

Confidence in the economic outlook among taxi drivers and restaurant staff and other workers soared by a record level in April, indicating the blow from last month’s sales tax increase may be short-lived, government data showed Monday.

A gauge of expectations for two to three months ahead rose to 50.3 from 34.7 in March, the biggest jump since the government started compiling such data in 2000, the Cabinet Office said in its economy watcher sentiment survey. The retail sector’s outlook doubled to 50.1.

The rebound in sentiment may lower the need for the Bank of Japan to add more stimulus to help the economy weather the tax increase to 8 percent from 5 percent. Sustained momentum would raise the odds the government will proceed with a plan to lift the tax rate to 10 percent next year as it looks to contain the world’s highest debt burden.

The “strong rebound in the outlook component suggests that any consumption tax-related weakness will prove fleeting,” Marcel Thieliant, a Singapore-based economist at Capital Economics. The economy is set to contract an annualized 3.3 percent in the April-June period, before a 2 percent expansion the following quarter, according to a Bloomberg News survey.

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