Japanese premier says tax hike to go ahead next year
Print Edition
PRIME Minister Shinzo Abe yesterday said he still plans to raise the consumption tax next year, denying speculation the planned increase would be postponed out of concern that Japan’s economy won’t be able to handle it.
The tax increase is needed to maintain Japan’s welfare system and to secure confidence from markets and the international community, Abe said at a news conference marking parliament’s formal approval of the government’s 96.7 trillion yen (US$850 billion) fiscal 2016 budget.
“There is no change to the tax hike plan next year unless there are situations like the Lehman shock or a massive earthquake,” Abe said.
The tax was due to rise to 10 percent from 8 percent in October 2015, but the hike was deferred until April 2017. Many in Japan think that with national elections looming this summer, Abe will be inclined to postpone the increase.
Abe has been meeting with Japanese and international economists, including Nobel laureates Paul Krugman and Joseph Stiglitz, who both suggested he should delay the hike.
Abe’s meetings with the economists are seen as laying the groundwork for another postponement. Japan’s economy initially expanded under an “Abenomics” policy mix of monetary easing and fiscal stimulus, but the growth has remained below forecasts due to China’s slowdown and lackluster spending by households and businesses. The economy is forecast to shrink in the current quarter following a contraction at an annual rate of 0.3 percent in the October-December quarter.
To address concerns about the economy, Abe said an additional package will be under way later this year.
The new budget also focuses on support for child and elderly care, education and defense.
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