Fiscal incentives

In July, the International Monetary Fund (IMF) issued a warning to Tokyo, you should not rely too weak yen for long-term economic stimulus. Abe’s government lowered the exchange rate by printing money, which aims to increase the competitiveness of exporters and exit from deflation continued for decades. The program, called analysts’ Abenomika “, launched in 2012, but has so far only managed to achieve short-term goals. For the entire period of the rise to power of Abe economy grew by 2%, while the value of incentives amounted to nearly 3% of GDP.

“If the weakness in private consumption is sustainable, it will be another blow to the Abe government, which lost electoral support before elections for the upper house of parliament,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse. According to him, this situation increases the probability of declaring the additional fiscal stimulus.

The latest forecast of the central bank’s economic growth of 1.5% for the year, but given recent data analysts expect it to be downgraded. Shrinking consumption, however, places the institution in a dilemma on financial incentives. One of the factors for the decline are the increased food prices, which in turn are due to more expensive imports due to a weaker yen.