Sayuri Shirai: Japan's economic activity, prices, and monetary policy -
relationships between the output gap, prices, and wages
Speech by Ms Sayuri Shirai, Member of the Policy Board of the Bank of Japan, at a meeting
with business leaders in Okinawa (held in Naha), 29 May 2014.
* * *
I. Introduction
Good morning, everyone. It is a great honor to have this opportunity to visit Okinawa
Prefecture and meet with local representatives here. I am really looking forward to learning
from you about this region through an exchange of views. I would also like to express my
sincere gratitude for your cooperation with the activities of the Bank of Japan's Naha Branch.
Let me briefly provide an outline of my speech. First, I would like to talk about the Bank's
baseline scenario of the outlook for economic activity and prices in Japan for the projection
period from fiscal 2014 through fiscal 2016, in line with the April 2014 Outlook for Economic
Activity and Prices (hereafter the Outlook Report). Next, I would like to shed light on the
concept of aggregate supply and demand balance (hereafter the "output gap") and explain
my view of how that is related to prices and wages. Afterward, I look forward to hearing your
candid opinions about the contents of my speech as well as your thoughts about the situation
facing the local economy.
II. Outlook for economic activity and prices
I will begin by describing the current condition of Japan's economic activity and prices, the
Bank's outlook for economic activity and prices (the baseline scenario) based on the Outlook
Report, followed by the upside and downside risks to that baseline scenario. My views will be
also touched upon. After that, I would like to explain the Bank's communication policy, with
some references to improvements made in the Outlook Report.
A. Outlook for economic activity and upside and downside risks
Japan's economy has continued to recover moderately as a trend, although the subsequent
decline in demand following the front-loaded increase prior to the consumption tax hike has
been observed. In the Outlook Report, the Bank revised downward its projected economic
growth rate for fiscal 2013 - as compared with the projections made in October 2013 and
January 2014 - owing mainly to sluggish export performance. However, a virtuous cycle of
economic activity has been operating steadily since domestic demand has been firm.
Weak exports reflect a shift in production locations abroad, a decline in Japanese firms'
international competitiveness, and weak recovery in the global economy. In addition, there
were temporary factors, such as deceleration in U.S. economic activity due to the adverse
effects of the unusually severe winter weather and firms' stance of placing priority on
domestic shipments in response to the front-loaded increase in demand prior to the
consumption tax hike. In this respect, I raised doubts about the Bank's overall risk
assessment regarding the baseline scenario of the outlook for economic activity in its
October 2013 Outlook Report. The Bank concluded that upside and downside risks were
"balanced," but I proposed that it should mention that attention should be paid to the
downside risks, mainly because there was a high degree of uncertainty regarding the
recovery in exports. I think that the cause of my concern has in fact materialized.
Meanwhile, domestic demand remains firm. This is led mainly by labor-intensive
nonmanufacturing, supported by public investment, housing investment, and private
consumption, thereby tightening labor market conditions and also effectively wiping out a
sense of excessiveness in production capacity. Taking these facts into account, the Bank
judges that the economy has been recovering steadily in line with the Bank's baseline
scenario.
According to the Bank's baseline scenario of the outlook for economic activity,
domestic demand is likely to maintain firmness. Exports are expected to increase, albeit
moderately, as overseas economies particularly advanced economies are expected to
moderately increase their growth rates. Thus, a virtuous cycle among production, income,
and spending is likely to be maintained (Chart 1). Meanwhile, the accommodative monetary
environment will continue to support economic activity. Moreover, firms' and households'
medium- to long-term growth expectations are expected to rise moderately against the
backdrop of progress in the government's growth strategy, as well as firms' initiatives toward
improving productivity and their tapping of potential domestic and external demand.
Therefore, the economy is likely to continue growing at a pace above its potential as a trend
throughout the projection period.
My outlook for economic activity is more or less in line with the Bank's baseline scenario.
However, my projections of the real GDP growth rates are somewhat lower than the median
of the Bank's Policy Board members' forecasts throughout the projection period. The rate of
economic growth is expected to temporarily turn negative in April-June 2014 owing to the
adverse impact of the consumption tax hike. But subsequently, the growth rate will likely rise
at a very moderate pace, and will likely remain above its potential growth rate throughout the
projection period.
The upside and downside risks to the Bank's baseline scenario regarding the
economy mentioned in the Outlook Report include the following: (1) developments in
exports; (2) the effects of the consumption tax hikes; (3) firms' and households' medium- to
long-term growth expectations; and (4) fiscal sustainability in the medium to long term. The
Bank assesses that these risks are balanced as a whole.
As for my own overall risk assessment related to the economy, the downside risks remain
somewhat greater than the upside ones, although the degree of downside risks has lessened
to some extent compared to October 2013 and January 2014. First, there is the risk that the
rate of increase in exports will be more moderate than projected. There is a possibility that
the U.S. economic recovery pace will be slower than projected as a result of sluggish
performance in the housing sector and relatively slow recovery in the employment conditions
for long-term unemployed workers and involuntary part-time workers. Tepid performance in
emerging economies, disinflation in the euro area, and geopolitical problems should also be
monitored closely. Second, there is a risk of domestic private consumption becoming
weaker. Since it is estimated that the rate of nominal wage increases will remain below the
CPI-based inflation (including the effects of the consumption tax hikes) throughout the
projection period, it is possible that real income may decrease and that consumer sentiment
as well as households' medium- to long-term expectations for growth and income may not
improve.
On this front, I disagreed four times in row with the Bank's risk assessment, which appeared
in the public statements released after the Monetary Policy Meetings (MPMs) held in January
through early April this year. This disagreement reflects my concerns that the public
statements referred only to developments in overseas economies as a risk factor, and did not
mention the pace of improvement in the employment and income situation in Japan, even
though it was pointed out in the October 2013 Outlook Report. However, the April 2014
Outlook Report clearly stipulates the effects of the consumption tax hikes as a risk factor by
almost reinserting the related description included in the October 2013 Outlook Report. The
current report also refers to consumer sentiment as an additional new factor (as well as the
employment and income situation and developments in prices) with regard to the
transmission channel of how the consumption tax hikes may affect private consumption. I
take these points as indications that my concerns were confirmed and shared by the Policy
Board.
B. Outlook for prices and upside and downside risks
The current price developments show that the year-on-year rate of increase in the CPI (all
items less fresh food) has been expanding, and recently has been around 11⁄4 percent.1
Major factors determining inflation rates are the output gap, medium- to long-term inflation
expectations, and import prices. Developments in these factors reveal that the output gap
has been improving and appears to have reached around the past long-term average of
about 0 percent. Medium- to long-term inflation expectations appear to have been rising on
the whole. As for import prices, upward pressure - mainly from the rise in energy prices -
has already begun to weaken somewhat.
According to the Bank's baseline scenario of the outlook for prices, the year-on-year rate
of increase in the CPI (excluding the direct effects of the consumption tax hikes) is likely to
be around the current 11⁄4 percent for some time, follow a rising trend again from the second
half of fiscal 2014, and "reach around 2 percent around the middle of the projection period."
Thereafter, Japan's economy is expected to gradually shift to a growth path that sustains
such inflation in a stable manner (Chart 2). Over the same period, as the adverse impact of
the consumption tax hike wanes, the output gap will continue to improve thereby providing an
upward pressure on prices, while medium- to long-term inflation expectations will remain on
a moderate rising trend on the whole. The upward pressure arising mainly from the rise in
imported energy prices is likely to wane around this summer, reflecting developments in
international commodity prices and weakening lagged effects of the yen's depreciation.
Regarding my own outlook for prices for fiscal 2014, I project that the year-on-year rate of
increase in the CPI may somewhat decelerate by this summer owing to the declining impact
of energy prices and the base effect from fiscal 2013, although it should remain at above
1 percent. The rate of inflation will then begin to rise again from October-December 2014.
However, this will be a gradual move given that it will likely take some time for households'
medium- to long-term inflation expectations to show a steady rise - an indicator implies that
they are currently remaining roughly constant (Chart 3). Thus, the rate of inflation will likely
be more moderate than the Bank's baseline scenario.
My outlook for the period during and beyond fiscal 2015 is that the year-on-year rate of
increase in the CPI will reach an average of approximately 11⁄2 percent or a little higher in
fiscal 2015, and the inflation rate of 2 percent is likely to be reached toward the end of the
projection period. Thereafter, Japan's economy is expected to gradually shift to a growth
path that sustains such inflation in a stable manner. Over the past year (when the projection
period was from fiscal 2013 through fiscal 2015), my outlook was that "the rate of CPI
inflation will rise closer to 2 percent toward the end of fiscal 2015" and thus I considered that
it was barely in line with the Bank's baseline scenario - described as "reaching around
2 percent toward the latter half of the projection period" of fiscal 2013 through fiscal 2015.
This is why I did not oppose the baseline scenario in the past. However, with the projection
period extended to fiscal 2016, I considered that the description of the price outlook should
clarify the timing when the Bank's "price stability target of 2 percent" will be achieved, rather
than providing an expression - namely, "around 2 percent" - that contains a degree of
latitude.2
The upside and downside risks to the Bank's baseline scenario regarding prices
mentioned in the Outlook Report cover the following: (1) developments in firms' and
households' medium- to long-term inflation expectations; (2) developments in the output gap;
(3) the responsiveness of inflation to the output gap; and (4) developments in import prices.
The risks to the price outlook are assessed as being largely balanced as a whole.
My own overall assessment on risks to prices is that the risks remain tilted somewhat to the
downside, although the degree of such downside risks has declined moderately compared
with October 2013 and January 2014. The path toward achieving the 2 percent target seems
broadly on track so far. However, there is uncertainty with regard to "the timing for achieving
2 percent" and thereafter "the timing to gradually shift to a growth path that sustains
2 percent in a stable manner." In particular, I suggest that clear judgment on the timing to
achieve 2 percent in a stable manner can be made only after examining the effects of the
second round of the consumption tax hike.
My aforementioned outlook for economic activity and prices assumes that quantitative and
qualitative monetary easing (QQE) will continue during and beyond 2015 under the current
framework. Under this current framework, the Bank will continue with QQE, aiming to
achieve the price stability target of 2 percent as long as it is necessary for maintaining this
target in a stable manner. What is important is that the Bank is conducting monetary easing
with the aim of achieving 2 percent inflation in a stable manner with sustainable economic
growth, rather than merely achieving 2 percent in a specific year and failing to meet the
target in subsequent years. Under the Bank's so-called flexible inflation targeting framework,
I maintain the view that it will likely take longer than "two years" to achieve the 2 percent
inflation - in order to avoid imposing excessive burdens on firms and households. Such a
path seems desirable for Japan's economy and is likely to lead smoothly to the next phase of
maintaining 2 percent in a stable manner. I will explain later my views on the path toward
achieving 2 percent with some background rationale.
C. The Bank's communication policy
I would like to take advantage of this opportunity to report that several changes were made in
the Outlook Report in terms of improving reader friendliness. The latest report now has a
"summary" section. This section provides the structure of the report as well as a brief
explanation on the examination from "two perspectives" in the context of meeting the price
stability target: the baseline scenario (first perspective); and upside and downside risks to the
baseline scenario (second perspective). Regarding these two perspectives, I submitted two
different proposals in April and October last year suggesting revisions to the text to make the
report easier to understand for the public. On this, I am glad to note that my proposal in
October was incorporated in the latest report. This revision also reflected my repeated
suggestion over the past years to insert a brief summary of the report. The Bank is now keen
to steadily improve its communication, albeit at a rather gradual rate, particularly toward
promoting the reader friendliness of its public documents.
These improvements can be considered a good example of the Bank achieving its intention
to strengthen its external communication: this was incorporated in the Bank's Strategic
Priorities for Fiscal 2014-2018, released in late March 2014, which describes the basic
principles of the Bank's business operations and organization. One of its key features is that
the Bank expressed that it will engage in Bank-wide efforts to steadily fulfill its mission of
achieving the price stability target of 2 percent; the document gave priority to strengthening
external communication to ensure broad public confidence. This new move reflects my call to
place greater emphasis on external communication - stressed ever since I assumed my
position as a Policy Board member. Especially in light of achieving the 2 percent target,
public understanding is indispensable. Concrete actions specified in the report include the
following: (1) making full use of information technology, for example through improvements to
the Bank's web site, and enhancing the in-house tours of its Head Office and branches;
(2) strengthening the Bank's communication with various people, firms, and economic
organizations; (3) publishing the findings from its research and analysis in effective ways;
and (4) supporting the activities of the Central Council for Financial Services Information and
associated committees to promote financial literacy among the public. Related departments
of the Bank have already prepared detailed plans to put the new strategic priorities into
practice. Accordingly, the Bank will continue to do its best to implement the priority issues
expressed in the Strategic Priorities.
III. Output gap in Japan
A shortage of demand for goods and services relative to supply capacity since the global
financial crisis has been a major cause of the sustained mild deflation in Japan. This situation
has recently improved as economic recovery has continued. Today, I would like to explain
my view on the process of achieving the 2 percent target, with a focus on the "output gap" as
a key word for understanding the background of the sustained mild deflation and recent
improvement.
A. Concepts of the output gap and its performance
The output gap is a term that refers to the difference between aggregate demand and supply
capacity. Usually, actual GDP is used as a proxy for aggregate demand, and potential GDP
as a proxy for supply capacity. The Bank estimates potential GDP as the production level
achieved under the current economic structure with an average utilization level of labor and
capital stock. Generally, whether a country's economic condition is in an upturn or a
downturn can be judged on the basis of the level of aggregate demand relative to the level of
supply capacity. If aggregate demand exceeds supply capacity with an average utilization
level of labor and capital stock, excess demand prevails, and the sign of the output gap
becomes positive. The converse is true for a negative sign of the output gap, implying a
stagnant economic activity level. Meanwhile, a change toward this positive territory implies
upward pressure on prices, and a change toward negative territory implies downward
pressure on prices. In Japan, the rate of real GDP growth has exceeded that of potential
growth since fiscal 2013, thereby contributing to a significant improvement in the output gap.
Now, let us take a look at some indicators related to the output gap. Chart 4 exhibits
(1) the estimates of the output gap by the Bank and (2) the composite indicator in the Bank's
quarterly Tankan (Short-Term Economic Survey of Enterprises in Japan). The Bank's
estimate reports an improvement from about minus 1 percent in July-September 2013 to
nearly 0 percent in October-December 2013, suggesting that the output gap is more or less
balanced.3 Meanwhile, the Tankan composite indicator - the proxy for the output gap based
on the extent of labor and capital stock utilized - is built as the weighted average of the
diffusion indices (DIs) for the employment conditions and production capacity from the
Bank's Tankan. Positive figures of the composite indicator signify that firms find that their
employment and production capacity are on the whole excessive, and negative figures mean
a shortage. Chart 4 shows that the indicator turned negative in 2013, pointing to a shortage
in employment and production capacity. It should be noted that the composite indicator gives
equal weight to respondent firms. Given that the Tankan respondents are dominated by
small firms, which face a shortage in employment and production capacity, the Tankan
composite indicator tends to reflect such a shortage more strongly than the Bank's estimate
of the output gap. Taking these factors into account, it is fair to judge the output gap as
currently being more or less balanced.
B. Interpretation of output gap estimates
There is a high degree of uncertainty with respect to estimates of the output gap. Care thus
needs to be exercised in its interpretation - as evident in the fact that the output gap estimate
by the Cabinet Office is in larger negative territory than that by the Bank for the same period.
In this regard, I would like to point out four issues regarding the Bank's estimation method of
the output gap.
First, estimation errors arise from different estimation methodologies and different data
sources. Although actual GDP data are available from the "National Accounts" compiled by
the Cabinet Office, there are no official data on potential GDP, and therefore institutions and
researchers have to make their own estimates from various data on, for example, labor and
capital stock. One distinctive feature of the Bank's estimate is that the Bank derives its
estimate of the potential growth rate by first determining the output gap and then applying the
actual GDP growth data (Chart 5).4 Conversely, the Cabinet Office first estimates the
potential growth rate and then derives the output gap by applying the actual GDP growth
data. Both estimates point to an improvement in the output gap from a long-term perspective.
Second, different estimates on the rate of potential economic growth may lead to
differences in output gap estimates. The Bank estimates Japan's potential growth rate to be
around 0.5 percent, while the Cabinet Office estimates this to be about 0.7 percent. The
difference may have suggested a greater improvement in the output gap in the case of the
Bank's estimate.5 Moreover, according to the Bank's estimate, the decline in Japan's
potential growth appears to have occurred since around the time of the global financial crisis.
This may be attributable to the manner that the demographic trend and a decrease of capital
stock due to physical disposal and wear are reflected in the estimate.
Third, the impact of tightening labor market conditions can also be captured using the
Bank's output gap estimate. The output gap can be divided into labor input gap and capital
input gap on the basis of resource utilization - just as with the Tankan composite indicator
(Chart 6). If the labor input gap is positive, actual labor input exceeds average labor input,
which indicates a labor shortage; if the labor input gap is negative, the converse is true. The
labor input gap had already turned positive by October-December 2013. This reflects a
continuous decline in average labor input, which was caused by a decrease in the number of
employed people and labor hours. This trend has been augmented since 2012 by the
retirement of the baby boomer generation reaching 65 years old. The labor shortage was
exacerbated further by the rapid economic recovery since 2013 driven by labor-intensive
nonmanufacturing. This observation is consistent with the following: (1) the Tankan's
employment conditions DI, which had already shifted to one of shortage; (2) the
unemployment rate of 3.6 percent in February 2014, which approached the structural
unemployment rate of around 3.5 percent; and (3) the positive growth trends in wages
(Charts 7 through 9).
Fourth, the Bank's estimate also reflects a rising shortage in production capacity mainly
in nonmanufacturing, as shown in a rapid improvement in its capital input gap. Chart 6
indicates that the capital input gap is presently in the vicinity of zero. The gap was nearly
closed by a rise in the capital utilization ratio; this was achieved by economic recovery while
business fixed investment has remained sluggish since the global financial crisis. In
particular, the construction sector faces a shortage in production equipment and facilities.
Moreover, a deficiency is also felt in information and communication services, reflecting
growing use of information technology by the services sector, and in the distribution and
retail sectors. These movements are consistent with the Tankan's production capacity DI for
nonmanufacturing, which points to a shortage in production capacity (Chart 10). In
manufacturing, the capital utilization ratio also improved rapidly when firms faced a
frontloaded increase in domestic demand prior to the consumption tax hike (Chart 11). Some
firms had to postpone exports in order to prioritize domestic demand.
C. Will the balanced output gap lead to immediate economic growth constraints?
Now that the output gap is almost balanced in Japan, the next issue is whether this condition
will impose a constraint on economic growth by creating a shortage in labor and capital stock
across nearly all sectors and firms. I would first like to touch on this issue from the short- and
medium-term point of view.
Because the balanced output gap simply means that aggregate demand is roughly equal to a
long-term average supply capacity, this would not immediately lead to growth constraints.
However, if a firm encounters a rapid temporary increase in demand - as was the case with
the front-loaded increase in domestic demand prior to the consumption tax hike in April 2014
- it may find difficulty in immediately hiring sufficient numbers of workers through want ads or
in quickly reassigning existing production capacity and employees to specific production lines
and services. This may adversely affect other firms, for example, in being unable to provide
parts and materials or having insufficient delivery cars and drivers. This condition actually
occurred among some firms and sectors in Japan until March 2014, but it seems to have
improved somewhat since April. The output gap therefore seems to have improved in
January-March 2014 and the opposite in April-June.
If exports begin to rise at a moderate pace, there will be room for manufacturing to raise
production without causing a severe labor shortage, owing to higher labor productivity than
nonmanufacturing. The manufacturing industry, which faced declining employment from the
early 1990s, managed to expand production by improving labor productivity until the global
financial crisis. In addition, business fixed investment in manufacturing has been increasing
gradually, and if the rate of increase exceeds that of physical disposal and depreciation
costs, this will likely further raise capital stock and supply capacity (Chart 5).
Moreover, improvement in skills and proficiency of workers will also contribute to an
improvement in labor productivity and accordingly, if a mismatch between supply and
demand of labor is reduced, this may open the possibility of lowering the structural
unemployment rate. The rate was generally in the range of 2-3 percent in the 1980s; it rose
to a peak of above 4 percent in the early 2000s before dropping moderately to the current
level of around 3.5 percent (Chart 8). The structural unemployment rate appears to have
risen on the backdrop of slow labor supply responses in adjusting to changes in the domestic
demand structure driven by the progressive aging of the population and a steady decline in
public investment.
Over the Bank's projection period, the potential growth rate is expected to rise from the
current level of around 0.5 percent toward around 1 percent. This will occur mainly through
an accumulation of capital stock, a moderate increase in the labor force participation ratio for
women and the elderly, and further improvement in total factor productivity (TFP). At the
same time, an economic growth rate exceeding the potential growth rate will expand the
output gap into the positive territory, mainly in fiscal 2014 and fiscal 2015. The greater
positive output gap will promote business fixed investment and an extension of working
hours by part-time workers, thereby helping to raise further the potential growth rate. It is also
expected that greater efforts will be made by the government to update existing institutions
and tax systems aimed at promoting full-time employment, settling the issues of children on
waiting lists for nursery schools, and promoting economic growth strategies.
To summarize, Japan's potential growth rate has declined in the aftermath of the global
financial crisis, partly owing to the sluggish economic growth. Decline in the potential growth
rate is commonly observed among other advanced countries. Going forward, Japan's
potential growth rate is expected to gradually rise toward about 1 percent, while the actual
economic growth will exceed the potential growth rate. The output gap will be expected to
improve from summer 2014 through fiscal 2015, and remain in the positive thereafter.
D. Medium- to long-term challenges implied by the output gap
I will now touch on the medium- to long-term challenges implied by developments in the
output gap. The pace of aging will accelerate in Japan, and the labor shortage will likely
intensify despite an increase in the labor force participation ratio for women and the elderly
as well as in the number of full-time workers. Given that the elderly tend to increase demand
for medical and nursery care, trips, and social expenditure, the economic structure will
probably be tilted further to labor-intensive nonmanufacturing. This suggests that
laborsaving initiatives will be needed in nonmanufacturing through the active use of information
technology and robotics as well as promoting a business-friendly environment that supports
competition, efficiency, and corporate governance. At the same time, comprehensive
measures to deal with the declining population will become important.
IV. Output gap, inflation expectations, and their relations to prices and wages
Next, I would like to explain my views regarding two important key words in achieving
2 percent price stability target - the output gap and inflation expectations - and how they
relate to price and wage developments.
A. Relations between the output gap and prices: the Phillips curve
An improvement in the output gap tends to exert upward pressure on prices. Such a positive
relationship between the rate of change in prices and the output gap may be expressed
using the Phillips curve. Chart 12 exhibits Phillips curves based on the CPI (for all items less
fresh food) and on the CPI (for all items less food and energy) as variables for price changes
on the vertical axis. Both Phillips curves were drawn based on two observation periods:
(1) from 1998 Q1 to 2012 Q3 (from the period with a decline in wages to the period prior to
the sharp depreciation of the yen and stock price hike); and (2) from 2012 Q4 to 2014 Q1
(from the period of the sharp depreciation of the yen and stock price hike to the present).
The slope of the Phillips curve based on the CPI (for all items less fresh food) appears
to have steepened sharply together with a rise in the intercept since October-December
2012. Among these changes related to the curve, the steepening of the slope indicates that
prices are more prone to rise than before in response to a similar degree of change in the
output gap (I will explain about the intercept later). This occurs when firms find it easier to
raise their sales prices or pass their input costs on to their sales prices. The recent
movement mainly reflects the sharp rise in imported prices as a result of a rapid and sharp
depreciation of the yen, that has accompanied a corresponding rise in the prices of energy
and other goods and services (Chart 13).
In contrast, in the case of the Phillips curve based on the CPI (for all items less food and
energy), a steepening of the slope is not clearly observed. This is attributable to the lesser
impact of the yen's depreciation: it is because this CPI omits food and energy prices that
account for about 30 percent of the weight of the CPI (for all items less fresh food). In this
sense, further steepening of the slope is expected to occur for the Phillips curve based on
the CPI (for all items less food and energy) in order to achieve the 2 percent target. However,
it seems that this process will take some time.
B. Changes in firms' deflation-oriented price-setting behavior
It is known that the Phillips curve for Japan has flattened since the late 1990s. One
contributing factor for this has been the decline in the frequency of price adjustments.
Reflecting the sluggish economy, discount price setting by competitors, and the preference
for lower prices by clients, firms were discouraged from raising their sales prices in the face
of concerns over a possible loss of market share - even though a rise in production cost
occurred. Currently, the situation signals the possibility that the price-setting environment of
firms may be improving. As economic recovery continues and the inflation rate steadily
increases at a moderate pace, the frequency of price adjustments increases, and thereby,
the slope of the Phillips curve will likely steepen gradually. In this regard, the sharp increase
in imported prices and the consumption tax hike appear to have provided opportunities for
fi