The nation’s composite PMI signalled contraction in October, as it fell to 49.1 from 51.5 in the previous month. In particular, the services index edged lower to join the manufacturing gauge, suggesting that the value-added tax (VAT) increase in October affected consumer-facing businesses. This week’s Eco Watchers survey will provide more insight into the early impact of the VAT hike on activity and sentiment. Its current-conditions component is likely to show a partial reversal of recent gains, falling to below its long-term average of 45.1 from 46.7 in September. By contrast, GDP data will provide a backward-looking picture of conditions before the rise in VAT. Consensus expectations are for GDP to increase by 0.9% on a quarter-over-quarter annualised basis in Q3, after posting 1.3% in Q2. The front-loading of purchases before the new VAT rate took effect probably boosted demand in Q3 and will likely cause Q4 output to soften. The Bank of Japan held rates steady at its October meeting. The next round of stimulus, should it be needed, will probably be mainly fiscal.