BOJ Kuroda Says April 2017 Sales Tax to Have Less Impact than 2014

Bank of Japan Gov. Haruhiko Kuroda said Monday that the impact of a sales tax increase scheduled for April 2017 would be much less than that which resulted from the hike in 2014 — sending Japan into a recession.

“The effect of the sales tax hike will be about a bit more than half of what it was last time,” Kuroda said in response to questions from the audience following a speech in Tokyo.

“Front-loaded spending and a following drop in demand won’t be as big as the last time” because the overall increase is smaller than in 2014 and reduced tax rates will be applied on some items this time, he said.

Kuroda, a former director of the finance ministry’s tax division, gave the clearest indication yet of his desire to proceed with the sales tax increase in the nation with the world’s heaviest debt burden.

Lawmakers have repeatedly been asking Prime Minister Shinzo Abe whether he’ll proceed with the tax increase, with one of his advisers calling for it to be postponed, citing continuing weakness in the economy.

“Kuroda can’t help but indicate he wants the tax increase,” Hideo Kumano, an economist at Dai-ichi Life Research Institute, said Monday after Kuroda’s remarks. “We don’t know if his calculation is right. There is no momentum in consumer spending, unlike the last time, so the damage could be larger.”

via Japan Times

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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