Hopes of a tax cut for Japan’s biggest businesses sent shares surging today despite more disappointing news on the economy.
Mounting speculation that prime minister Shinzo Abe is considering the corporation tax cut — giving a further spur to the world’s third biggest economy after a slowdown between April and June — sent cash flooding into equities. Reports suggested the cut could ease the impact of a planned VAT rise next year, which threatens to undermine a recovery fuelled so far by Abe’s public spending programme and a huge money-printing programme from the Bank of Japan.
The Nikkei added 2.6% today — leaving it up 33% so far this year — as the likes of exporters such as Honda, Toyota and Panasonic also gained ground thanks to a weaker yen.
Businesses remain reluctant to invest, however, as machinery orders fell 2.7% in June. The fall comes after yesterday’s growth figures for the wider economy showed the sixth successive decline in business investment during the second quarter.
