Japan may grow above-potential level in 2016

There is a significant improvement in the current account balance in Japan in last few quarters. This is supported by the weaker JPY and low energy price.

The JPY is currently one of the most undervalued currencies among the majors currencies, the fair value is below 100 for USD/JPY as the PPP model suggests.

Corporate investment in Japan has picked up as a positive response to some of the reforms. Hence, the Japan's economy is expected to grow above-potential growth in 2016, forecasts Nordea Bank.

However, the sales tax hike scheduled in April 2017 would reduce consumer and company spending, and thereby economic growth of the country will be affected.