PM Shinzo Abe is Neutral on Next Round of Tax Hikes

rime Minister Shinzo Abe stands “utterly neutral” on whether to decide in December to raise the sales tax again next year but he will be very cautious in his decision given the potential blow to the economy, Japan’s economy minister said on Friday.

Economy Minister Akira Amari, speaking to reporters in a group interview after a cabinet reshuffle, said the government is ready to roll out a stimulus package to limit the economic impact if it decides to raise the sales tax next year.

Abe is due to decide in December whether to proceed with a second-stage rise in the sales tax to 10 percent in October 2015 in a bid to rein in Japan’s massive public debt.

 
April’s rise to 8 percent from 5 percent triggered the biggest contraction in three years in the second quarter, followed by a run of other weak indicators, raising doubts about whether Japan should go ahead with the hike.

“As to what the prime minister is thinking, it’s utterly neutral,” Amari said. “He said no countries have doubled the sales tax rate over a year and a half … I expect that he will make a considerably cautious decision.”

Amari said he expects a very cautious decision, particularly if any risk emerges of the economy relapsing into deflation as that would ruin the very aim of Abe’s reflationary policies known as “Abenomics”.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza