It is expected that Japan's consumption tax increase on April 1, amid an imbalance seen between rising inflation rates and labor costs, will add short-term pressure to its domestic consumption. However, the government's new economic stimuli for fiscal 2014, plus the continuing benefits of such measures from last year, may help the Japanese economy to grow 1.4 percent in 2014. That figure would be slightly lower than the 1.5 percent growth achieved for 2013, though higher than the average growth rate of 0.3 percent over the past five years (2009-2013).
Meanwhile, it is expected that Japan's consumption tax hike will undermine Thai shipments to Japan during the last three quarters of 2014, despite the fact that our exports to Japan resumed growth of 2.3 percent YoY during 2M14, following a steady contraction seen between May-December 2013, partly because Japan accelerated their imports from Thailand prior to the consumption tax increase.
Given this, we at KResearch expect that Thai exports to Japan during 2014 will likely shrink by 0.5 percent, or be within (-)2.5 – (+)1.5 percent, which would be better than the contraction of 5.2 percent reported for 2013, but far lower than the average growth rate of 3.6 percent recorded over the past five years.
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