Japanese Sales Tax Debate Might Trigger More Stimulus

The government on Monday commenced its final efforts to analyze the possible negative economic impact of the planned sales tax hike next April, seeking opinions from dozens of experts, some of whom have suggested the need for further stimulus steps.

A government panel led by economic ministers started a six-day hearing amid lingering concern that the consumption tax increase to secure funds for swelling social security costs could thwart Prime Minister Shinzo Abe’s efforts to overcome nearly two decades of deflation.

The panel will hear from 60 people from a variety of backgrounds, including heads of nonprofit groups, scholars and business leaders, to provide Abe with information to decide as early as next month whether to proceed with the tax hike to 8 percent from the current 5 percent.

“I will make a decision this fall once the panel reports and after looking at various economic indicators,” Abe told reporters while visiting Kuwait.

Abe has said he will examine Japan’s economic growth data for the April-June period, among other factors. Revised figures for second-quarter gross domestic product are due out on Sept. 9.

On Monday, the panel heard from seven people, including Kazumasa Iwata, a former deputy governor of the Bank of Japan, who proposed cutting corporate and individual income taxes to ease the potential pressure on domestic demand from the sales tax hike.

via Mainichi

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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