2014.06.0902:33:16UTC+00Investments helping Japanese economy stay afloat

After Japan increased its sales tax to 8% in the beginning of April, the second quarter was expected to be a severe let down, but so far, the East Asian economy has shown that attention shouldn't be on if it will recover, but to how fast the rebound will be.

Earlier today, Tokyo’s Cabinet Office said that, during the first three months of 2014, Japan’s gross domestic product increased by a yearly adjusted rate of 6.7%, exceeding the initial 5.9% forecast. In order to maintain this momentum and use it to rebound from the expected slowdown in succeeding quarters with the new sales tax implemented, a rise in business investment is predicted to play a significant role. shouldn't

Compared to the last quarter, business investments has climbed 7.6% from an original estimated improvement of 4.9%. Likewise, consumer spending, which plunged in the hike’s aftermath, is up 2.2% also higher than the 2.1% foreseen.

According to a Bloomberg survey, in this year’s second quarter from April to June, the Japanese economy is expected to contract by as much as 3.5% partly due to the new sales tax. Business investments are seen to help towards an immediate return towards the positive, however, resulting in a 2% growth in the third quarter. It is believed that Japan’s Prime Minister, Shinzo Abe, will use data on how the economy will recover in this period from July to September to determine the best time for another hike in the sales tax amounting to a rate of 10%.

Even if the rebound during the middle part of the year goes slower than hoped, additional monetary stimulus from the Bank of Japan is not expected to be introduced. Instead, banks and investors are turning their heads toward Abe’s scheduled reveal this month of his strategy for a long term recovery.