Analysts Argue Japan Should Raise Taxes Now

Disappointing second-quarter growth figures from Japan may have heightened calls for the government to delay a controversial hike in the country’s consumption tax, but analysts argue that now remains the best time to deliver the measure.

On Monday, Japan logged a third straight quarter of expansion, posting an annualized growth rate of 2.6 percent for the three months to June, but the increase fell short of forecast by a full percentage point.

The data drew opposing opinions from government officials over the plan to raise the sales tax, which is due to increase to 8 percent next April from the current 5 percent, and to 10 percent in October 2015.

While the adviser to Prime Minister Shinzo Abe, Koichi Hamada, said the weaker-than-expected figures showed the government was in no hurry to raise the tax and could consider delaying the measure by one year, economy minister Akira Amari described the data as “good numbers” which are supportive to the sales tax hike plan.

But analysts CNBC spoke to were united in the view that now is Japan’s best window of opportunity for the sales tax hike, with the economy accelerating and while markets are in need of assurance that the government is serious about reducing its debt, which currently measures over 200 percent of gross domestic product (GDP).

via CNBC

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