Japan's industrial production up 2.7% in Sept

but fell short of giving a clear positive outlook.

Anyone who would give "a clear positive outlook" for the Japanese economy right now is a fool -- way too much uncertainty.

"Official data"? You mean the same official data which adds stimulus projects funded by deficit spending to GDP growth instead of subtracting it? This is the same thing as buying a new car with a credit card and then adding the value of my car as an asset, and ignoring the interest-bearing debt used to buy it. The government doesn't apply the same accounting rules to itself which they enforce in the private sector.

The "increase" in production is likely the result of the expansion in defense spending, the SDF will be getting a lot more new toys to play with.

“Overall, we still expect GDP to increase by around 0.5% quarter-on-quarter in Q3,”

Or less than 1/4 of what was previously predicted for Q3, and of course it isn't mentioned that even if this growth occurs, it is still in the negative for the year.

sangetsu03

You mean the same official data which adds stimulus projects funded by deficit spending to GDP growth instead of subtracting it?

Well the article is talking about industrial production data, as opposed to the GDP numbers, and volatility in these numbers is noted in the article. If the officials were fudging them they'd presumably make them look decent on a more consistent basis!

even if this growth occurs, it is still in the negative for the year.

Yes, but when you are sick as Japan is, you have to take your medicine.

A major part of Japan's sickness is that the government is too indebted, and while bumping up the consumption tax may seem like a shot in the foot in the short term (indeed it is), Japan's consumption tax rate is still relatively low compared with other places, and there are much more damaging ways to tax than broadly taxing consumption as Japan does.

Longer term I believe there will be benefits for growth from the hike, should the government succeed overall in reducing its debt load, as people would have more confidence in the government, and thus less need for precautionary saving and a greater propensity for spending.

The retail spending numbers came out up on 2013 number the other day and that does seem to support the idea that people have just sucked it and are gradually getting on with life. And the tax is going to go up again next year anyways so might as well spend now.

"Japan's consumption tax rate is still relatively low compared with other places."

It's an issue of where the burden lies. In Japan, I'm separately billed for my basic pension, which is free and more generous in my home country. I'm also billed steeply for national health insurance, which in my home country is largely incorporated into the tax system. Daycare centers and other social services also place higher burdens on Japanese households.

If Japan's sale tax rises to international levels, then Japanese will have the worst of all worlds...steep taxes all around plus paying for essential social services thru separate billing. They will simply not consume nearly as much as they should, which is key is getting the economy growing.