The Japanese government announced a corp. tax cut while urging Japanese firms to use their windfall profits from the weaker yen to pay wages. The government also adopted fiscal stimulus mostly aimed at boosting the economy. But these steps should provide only a temporary relief to the economy and so financial markets were not impressed. Labor market reforms like creating favorable environment for immigrant workers and policies encouraging labor participation could trigger a next leg higher in Japanese stocks. The BOJ will acknowledge at some point in 2015 that the 2% inflation target cannot be achieved in 2 years and consequently announce another round of easing, possibly in October 2015. Since many market participants had already built massive yen short positions, the yen's further depreciation is unlikely to be sizeable. USD/JPY is expected to trade between 125 and 130 in 2015.
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