Uncertain time for Japan as it digests sales tax hike

JAPAN'S economy entered a more uncertain phase yesterday as the national consumption tax rose for the first time in 17 years, from 5 per cent to 8 per cent, threatening to snuff out recovery in the world's third-largest economy and as a Bank of Japan (BoJ) survey forecast a decline in business sentiment in coming months.

The BoJ's latest quarterly survey of business conditions, the "tankan", showed sentiment had improved somewhat in the three months to March among major manufacturers, even as they are forecasting a deterioration in coming months and non-manufacturers a sharper decline.

Separate data published yesterday showed that the threat of slowing output is not confined to Japan. In China, the final Markit/HSBC Purchasing Managers' Index (PMI) gauge of factory activity, fell to an eight-month low of 48.0 in March, also boding ill for regional activity.