Shinzo Abe Receives Support For Sales Tax Hike

Japanese Prime Minister Shinzo Abe got ammunition for pressing ahead with a sales-tax increase when most members of panels advising the government backed the move even as they urged stimulus to cushion the economic blow.

A majority of those in seven consultative panels favored proceeding with the planned April increase, Economy Minister Akira Amari told reporters Aug. 31 in Tokyo, after the final group met. Members of the panels, which were set up by the government, called for “sufficient stimulus,” he said.

The consultation exercise may help Abe justify raising the nation’s tax to 8 percent in April from 5 percent now, in the first of two increases that would ultimately boost the levy to 10 percent. While the move would shore up Japan’s finances — a topic Japan is set to discuss at a Group of 20 nations meeting in St. Petersburg, Russia, this week — the blow to consumption could send the economy back into contraction.

“We’re only two quarters into Abenomics and I’m a little anxious that a sales-tax increase is going to undermine the process,” said Tim Condon, head of Asia research at ING Groep NV in Singapore. He said that the government is more likely than not to proceed with the move.

Abe is trying to sustain a recovery driven by fiscal and monetary stimulus as he moves on to tackling changes such as deregulation, needed for a longer-term revival. The yen’s 20 percent decline against the dollar in the past year and gains in stocks have helped fuel the nation’s comeback.


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu