Japan lawmakers group to urge PM to stick with tax hike

20 May, 2016 8:51 am

TOKYO – A group of Japan’s ruling lawmakers will petition the country’s prime minister to proceed with a planned sales tax hike next year and compile a supplementary budget to mitigate the impact of the tax, a source familiar with the matter told Reuters.

The proposal marks a reversal in thinking for the policy study group, which is led by a Liberal Democratic Party (LDP) lawmaker Kozo Yamamoto, one of the architects of Prime Minister Shinzo Abe’s economic policy strategy who previously proposed the premier delay the tax hike.

The lawmakers are also likely to petition the government to compile a 15 trillion yen to 20 trillion yen (93.57 billion pounds to 124.76 billion pounds) additional budget for this fiscal year, which would contribute to 37 trillion yen of supplementary measures over the next three fiscal years, the source said on Friday.

This would be in addition to this year’s 778 billion yen supplementary budget, aimed solely at reconstruction in the country’s earthquake-hit south.

The government plans to increase the levy to 10 percent from the current 8 percent next April unless there is a financial crisis on the scale of the Lehman Brothers collapse or a major natural disaster.

Abe has been saying he will make an appropriate decision on the sales tax, taking into account opinions from experts on the economy.

But there is growing speculation that Abe will again postpone the planned tax hike, having already delayed it once after an increase to 8 percent from 5 percent in April 2014, which hurt consumption and knocked the economy into recession.


Economy Minister Nobuteru Ishihara said while the tax hike is needed to secure Japan’s future economic prosperity, there were “various views” among LDP lawmakers and external advisors about the hike.

Ishihara said a government advisory panel on the global economy, which has been meeting since March, saw a stable global economic trend but noted downside risks from geopolitics.

U.S. Nobel laureate and economist Joseph Stiglitz and economist Paul Krugman have both spoken to the panel and advised Abe to delay the tax increase and focus on fiscal efforts to boost a recovery.

But OECD Secretary-General Angel Gurria told the panel Japan should stick with its the tax plan and raise it further to pare public debt.

Japan narrowly dodged a recession in the first quarter due to additional consumption from the extra leap year day, but the rebound has not dispelled analyst concerns about a contraction this quarter. -Reuters




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