The U.S. dollar hit its lowest level in two weeks against the yen on Wednesday after Japan delayed a sales tax hike for longer than expected, raising concerns about the lack of Japanese monetary stimulus to halt the yen’s rise. According to a simulation by Daiwa Institute of Research released on May 24, the delay will result in a loss of ¥3.5 trillion in potential consumption tax revenues and a gain of only ¥1 trillion in income and corporate tax receipts.
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See live rates for the NZ-US $ below.
The impact of the April 2014 tax hike, which occurred as inflation ticked up to 1.5 percent, was “beyond everyone’s expectations”, said Sayuri Shirai, a former central bank board member and professor at Tokyo’s Keio University.
“New orders point to little upside in the coming months”.
Prime Minister Shinzo Abe’s plan will raise pay for child care workers, raise the minimum wage and improve access to elderly care, but economists say the reforms do not go far enough to change Japan’s two-tier labour market.
It was the first time that negative rates had been brought in by Japan and came as a surprise to many economists.
Market turnover has trended lower in recent days as investors stayed on the sidelines awaiting more clues on the future trend of US monetary policy.
The opposition parties believe that Abe postponing the sales tax hike is a tacit admission that “Abenomics” has utterly failed and, in fact, has worsened Japan’s economic situation.
The data will be followed by a speech from Federal Reserve Chair Janet Yellen on Monday, the last chance for the Fed to communicate with markets before it begins a blackout period ahead of its policy meeting on June 14-15. “The second was that the dollar was vulnerable after having actually risen too dramatically”, stated Shin Kadota, primary Japan FX strategist at Barclays in Tokyo. First was the degeneration in danger appetite.
“Lastly, some participants appeared let down that the prime minister did not accompany the tax hike delay announcement with clear stimulus plans”. The euro was also down 0.75 percent against the Japanese currency at 122.35 yen. The BOJ has kept monetary policy steady since then. “A lot depends on payrolls”, he said in reference to Friday’s U.S. May employment report.
OPEC MEETING: Investors are closely watching for the outcome of a top-level meeting of the Organization of the Petroleum Exporting Countries on Thursday in Vienna.
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The euro rose 0.1 percent to $1.1199, edging away from a 2-1/2 month low of $1.1097 set earlier this week. But later, Iran’s Oil Minister Bijan Zanganeh disagreed. USA stocks are bouncing back early Thursday, May 12, 2016, as companies, including agribusiness giant Monsanto, are climbing on reports of possible buyouts.
