Japan watchers are paying particular attention to this reporting season which they say will give important insights into how corporate profitability is holding up following the recent consumption tax hike.
“At the beginning of this fiscal year [April 2014], company guidance tended to be on the weak side because of concerns around consumption tax hike. But so far the macro environment hasn’t been so bad, so earnings could be better than originally expected,” Hiromichi Tamura, chief strategist at Nomura Securities told CNBC.
In April, Japan raised its consumption tax to 8 percent from 5 percent, the first increase in 17 years, as part of efforts to rein in mounting public debt. The move prompted concerns that the economy’s fragile recovery could be derailed. However, its impact has so far been mixed, with corporate sentiment souring, but consumer demand holding up.
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