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| Japanese government to go ahead with sales tax rise | |
| (about 4 hours later) | |
| Japan's Prime Minister Shinzo Abe said his government will raise the rate of sales tax to 8% from 1 April next year, from the current 5%. | |
| Policymakers have argued that the hike is key to reducing Japan's public debt - which now stands as around 230% of its gross domestic product (GDP). | |
| There have been concerns that such a move may hurt domestic demand. | |
| However, analysts said recent data showing signs of a recovery in the economy had helped allay those fears. | |
| Legislation passed by Mr Abe's predecessor last year had called for the rate to be raised. | |
| The government needs to increase its revenue as it looks to fund rising welfare costs, driven by an ageing population. | |
| It is estimated that 40% of Japan's population will be of retirement age by 2060. | |
| Mr Abe was quoted by the AFP news agency as saying the tax hike was aimed at "maintaining the nation's trust and handing over a sustainable social security system to the next generation". | |
| He added that his government would unveil a fresh stimulus package to ease the impact of the hike on businesses and households. | |
| 'Broad-based improvement' | |
| Earlier on Tuesday, the Bank of Japan's closely-watched Tankan survey showed a sharp improvement in sentiment among Japanese manufacturers. | |
| The big manufacturers' index rose to plus 12 in the July-to-September quarter, from plus 4 in the previous three months. | The big manufacturers' index rose to plus 12 in the July-to-September quarter, from plus 4 in the previous three months. |
| Manufacturers also plan to increase their spending in the current financial year, which should help boost growth. | Manufacturers also plan to increase their spending in the current financial year, which should help boost growth. |
| The improvement comes amid signs of a recovery in the Japanese economy after years of stagnant growth. | The improvement comes amid signs of a recovery in the Japanese economy after years of stagnant growth. |
| "Japan's economy is on track, and the tankan has shown broad-based improvement in sentiment," said Yasuo Yamamoto, a senior economist with Mizuho Research Institute in Tokyo. | "Japan's economy is on track, and the tankan has shown broad-based improvement in sentiment," said Yasuo Yamamoto, a senior economist with Mizuho Research Institute in Tokyo. |
| "Manufacturers had been lagging the overall economy, but the tankan shows improvements in this sector are starting to catch up due to exports and a weak yen." | "Manufacturers had been lagging the overall economy, but the tankan shows improvements in this sector are starting to catch up due to exports and a weak yen." |
| The sentiment indexes are calculated by subtracting the percentage of respondents who say business conditions are poor from those who say they are good. | The sentiment indexes are calculated by subtracting the percentage of respondents who say business conditions are poor from those who say they are good. |
| A positive reading means optimists outnumber pessimists. | A positive reading means optimists outnumber pessimists. |
| Abenomics boost | Abenomics boost |
| Prime Minister Shinzo Abe, who came to power in December last year, has unveiled a series of aggressive policy measures aimed at reviving Japan's economy. | Prime Minister Shinzo Abe, who came to power in December last year, has unveiled a series of aggressive policy measures aimed at reviving Japan's economy. |
| His moves, which have come to be known as Abenomics, have started to have some impact on Japan's growth. | His moves, which have come to be known as Abenomics, have started to have some impact on Japan's growth. |
| At the same time, Japan's central bank, the Bank of Japan, has also taken some steps - including setting a 2% inflation target and doubling the country's money supply - to help boost growth. | At the same time, Japan's central bank, the Bank of Japan, has also taken some steps - including setting a 2% inflation target and doubling the country's money supply - to help boost growth. |
| These measures have resulted in a sharp decline in the yen's value. The Japanese currency has fallen nearly 25% against the US dollar since November last year. | These measures have resulted in a sharp decline in the yen's value. The Japanese currency has fallen nearly 25% against the US dollar since November last year. |
| A weak yen bodes well for Japan's large manufacturers, who rely heavily on exports for their growth, as it makes their good more affordable for foreign buyers. | A weak yen bodes well for Japan's large manufacturers, who rely heavily on exports for their growth, as it makes their good more affordable for foreign buyers. |
| It also helps boost their profits when they repatriate their foreign earnings back home. Many leading Japanese firms have reported an improvement in profits recently. | It also helps boost their profits when they repatriate their foreign earnings back home. Many leading Japanese firms have reported an improvement in profits recently. |
| Analysts said that an improvement in earnings, coupled with the signs of a recovery in the Japanese economy, had helped boost morale. | Analysts said that an improvement in earnings, coupled with the signs of a recovery in the Japanese economy, had helped boost morale. |
| "Earnings recovery on the back of a weaker yen, which affected only limited sectors at the time of the previous survey, has spread to a wider part of industry," said Yoshimasa Maruyama, chief economist with Itochu Economic Research Institute in Tokyo. | "Earnings recovery on the back of a weaker yen, which affected only limited sectors at the time of the previous survey, has spread to a wider part of industry," said Yoshimasa Maruyama, chief economist with Itochu Economic Research Institute in Tokyo. |