After the Bank of Japan’s meeting earlier this week, BoJ Governor Kuroda said he has no immediate plans for additional easing. The Japanese consumption tax was raised from 5% to 8% on April 1, the first hike since 1997 when the economy fell into a recession. Higher taxes will likely reduce the effectiveness of Abenomics going forward, and many longer-term investors are starting to reduce allocations to Japan. The Nikkei, despite a 12% drop this year, remains up 65% since Abenomics began in 2012. The Abenomics experiment initially attracted investors because it was such a bold move, but if the BoJ hesitates now, expect the outflows to continue.
Japan’s Nikkei 225 Index