Former BoJ Member Says Tax Hike Should Wait

Japan should delay a planned hike in the sales tax in order to ensure that the economy emerges from deflation, said Nobuyuki Nakahara, a former Bank of Japan board member and close confidant of Prime Minister Shinzo Abe.

Nakahara told Reuters the sales tax hike, scheduled in April, should wait until the autumn of next year, when inflation will likely have taken root.

“(The scheduled tax hike) would have a serious negative impact similar to the Bank of Japan’s 2006 exit from quantitative easing and zero interest rates,” he said.

He also warned that the pursuit of fiscal reform at this time could cause the yen to strengthen, reversing a weakening of the yen under Abe’s policies that has boosted exports.

The current tax hike plan, backed by Finance Minister Taro Aso, would increase the rate to 8 percent from 5 percent next April, and raise it further to 10 percent in October 2015.

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