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29 Dec 2014
Japan corporation tax cut may spur domestic production growth – Nomura
FXStreet (Barcelona) - A large corporation tax cut should spur continuation of the recent growth in domestic production, notes Nomura, expecting the tax cut to positively impact Japanese exports.
Key Quotes
“Although the corporation tax cut will ostensibly be largely offset by tax increases, its prospective impact on companies' location strategies cannot be overlooked.”
“According to our analysis, given a constant USD/JPY rate of 110, if the effective corporation tax rate were reduced to 25%, Japanese exports would be about 46% higher in unit terms in 2025 than in 2014, but if the effective corporation tax rate were to remain unchanged, unit exports would increase only 35% over the same timeframe.”
“With Japanese companies' overseas capex recently slowing, domestic capex growth has started to outpace overseas capex.”
“Whether Japanese companies in aggregate will go as far as to repatriate production by shutting down overseas production capacity remains to be seen, but the large pending corporation tax cut is likely to contribute substantially to spurring continuation of recent expansion of domestic production. “
Key Quotes
“Although the corporation tax cut will ostensibly be largely offset by tax increases, its prospective impact on companies' location strategies cannot be overlooked.”
“According to our analysis, given a constant USD/JPY rate of 110, if the effective corporation tax rate were reduced to 25%, Japanese exports would be about 46% higher in unit terms in 2025 than in 2014, but if the effective corporation tax rate were to remain unchanged, unit exports would increase only 35% over the same timeframe.”
“With Japanese companies' overseas capex recently slowing, domestic capex growth has started to outpace overseas capex.”
“Whether Japanese companies in aggregate will go as far as to repatriate production by shutting down overseas production capacity remains to be seen, but the large pending corporation tax cut is likely to contribute substantially to spurring continuation of recent expansion of domestic production. “