Fitch: Further easing measures from BOJ cannot be ruled

The US-based Fitch Ratings Agency offers its view on the Japanese economy and the next Bank of Japan (BOJ) monetary policy move, against the backdrop of the recent sales tax hike.

Japan consumption tax rise helps medium-term fiscal consolidation.

Very high public debt in Japan will remain a key credit weakness.

Japan government’s ability to enact increase reflects relative political stability under Shinzo Abe’s current prime ministerial term.

Japan’s public debt dynamics have stabilized due to resumption of nominal GDP growth in recent years.

HIke signals government’s confidence that economic growth momentum in japan is sufficient to sustain a higher consumption tax.

Expect overall japan GDP growth to slow after a strong 1h19, as external demand weakens due to slowing global growth and us-china trade war.

Expect Bank of Japan to maintain its ultra-loose monetary policy settings.

Would not rule out further easing measures from BOJ if growth falters below their expectations.

Would not rule out additional fiscal stimulus from BOJ, possibly from a supplementary budget early next year, to counter cyclical headwinds.