Japan

The Japanese prime minister Abe came out with three economic plans to expand its economy

1.  Increase in government spending ($182 billion)
2. Radical quantitative easing ($1.4 trillion)
3. Depreciated Yen (19% since 2013)
4. Targeted inflation rate by 2% (increase in sales tax)

It was successful from the beginning.

As we can see, GDP of Japan continuously increases since the second quarter of 2013. It means that fiscal and monetary policy are working well in the economy. The BOJ keeps buying buying bonds which increase money supply that cause inflation. While it keeps interest rate low (0%), it looks for expansion of consumer expenditures.

But there are issues in second quarter. Even Yen has been depreciated by 30% from the peak in fourth quarter of 2011, export was declined by 2% in June. Even more, market survey like PMI, balance trade and retail order declined in past months. It happens after the government decided to increase the tax sale by 8% in April 1st, 2014. The consumer expenditure decreased, which eventually decreased PMI and retail order. Economic growth in China also doesn't look strong enough that eventually decreased Japanese exports by 2.2%.

The core of Abenomics is to restore exports level while increase consumer expenditure. With increase in sales tax, however, economic expansion would stop where it is now. 

Japan trade deficit expands after exports unexpectedly drop from a year earlier

•    Exports ▼2% while imports ▲8.4% YoY
•    Declined 5.1% in electrical machinery exports
•    Exports to U.S. ▼ by 2.2%; automobile shipments ▼ by 6.8%, 3.8% to Asia while ▲ by 1.5% to China and 6.4% to EU

·         Slower Japan inflation in June

•    CPI excluding food ▲ from a year earlier
• ü  CPI ▲ 3.4% in May

·         Japan’s Retail Sales Drop in Challenge to Abe Reflation

• Japan’s retail sales feel more than forecast in June
• Sales ▼0.6% YoY; forecast was ▼0.5%
• In the second quarter, sales ▼7% QoQ
•    Unemployment ▲ to 3.7% (3.5% previous month)
• However, labor force ▲by 120,000 people
• It indicates that the current level of vacancies still points to further declines in the jobless rate in coming month

·         Japan’s output drops most since 2011 as consumers spend less

• Japanese Industrial Output (-3.3% MoM) in June
• ▲0.7% in May
•    The widening impact to the economy of April’s sales-tax increase
•    The manufacturing sector has cut back in response to  a slump in consumer spending and a failure of exports to pick up even after an 19% drop in the yen last year