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29 Dec 2014
Japanese cabinet approves stimulus package – Nomura
FXStreet (Barcelona) - The Research Team at Nomura note that the Japanese cabinet approved a modest stimulus package of yen 3.5trn which is sufficient to bolster Japanese economy, anticipating it the boost GDP by 0.39%.
Key Quotes
“The government estimates that the stimulus package will boost GDP by roughly 0.7%, but this estimate implies that nearly the entire ¥3.5trn will be accretive to GDP. This assumption is overly optimistic in our view.”
“The portion of the stimulus package earmarked for public works projects should be almost entirely accretive to GDP, but we doubt that all of the funding for households or small businesses will be spent on additional consumption or capex (eg, some of it will fund previously planned expenditures). In light of such, we estimate that the stimulus package will boost GDP by only about 0.39%. For FY15 alone, we estimate its contribution to GDP at +0.26%. In short, its stimulus effect may be relatively modest.”
“At ¥3.5trn, the new stimulus package is considerably smaller than the FY13 supplemental budget of ¥5.5trn. Additionally, we expect exports and personal consumption to be tailwinds for Japanese economic growth.”
“Although real GDP growth was negative on a q-q basis for the past two quarters, we see a high probability of resumed growth in private demand from CY14 Q4. In light of such, the ¥3.5trn stimulus package should be sufficient to bolster the Japanese economy in our assessment.”
Key Quotes
“The government estimates that the stimulus package will boost GDP by roughly 0.7%, but this estimate implies that nearly the entire ¥3.5trn will be accretive to GDP. This assumption is overly optimistic in our view.”
“The portion of the stimulus package earmarked for public works projects should be almost entirely accretive to GDP, but we doubt that all of the funding for households or small businesses will be spent on additional consumption or capex (eg, some of it will fund previously planned expenditures). In light of such, we estimate that the stimulus package will boost GDP by only about 0.39%. For FY15 alone, we estimate its contribution to GDP at +0.26%. In short, its stimulus effect may be relatively modest.”
“At ¥3.5trn, the new stimulus package is considerably smaller than the FY13 supplemental budget of ¥5.5trn. Additionally, we expect exports and personal consumption to be tailwinds for Japanese economic growth.”
“Although real GDP growth was negative on a q-q basis for the past two quarters, we see a high probability of resumed growth in private demand from CY14 Q4. In light of such, the ¥3.5trn stimulus package should be sufficient to bolster the Japanese economy in our assessment.”