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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 [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
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