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Sales tax hike contingent on economy: Aso

Kyodo

The government will not go ahead with the planned sales tax hike from the current 5 percent to 8 percent next April unless the economy is on a growth path, Finance Minister Taro Aso suggested Tuesday.

Legislation enacted last August says the government will not raise the consumption tax “if the economy is not improving,” Aso said at a press conference.

“It’s too early to decide” whether to carry out the tax hike, he added, emphasizing the administration of Prime Minister Shinzo Abe will make a final judgment while carefully assessing several economic data, such as gross domestic product and wage growth.

The legislation stipulates as a nonbinding target for the sales tax hike that the government will seek to accomplish nominal economic growth of around 3 percent and real growth of about 2 percent.

The economy expanded at an annualized rate of 4.1 percent in the first three months of 2013 in inflation-adjusted terms, marking the second straight quarter of growth.

Some analysts said the consumption tax hike is necessary to restore the nation’s fiscal health, the worst among industrialized nations, but it could hurt consumer spending and in turn the economy, which has recently shown signs of breaking out of deflation.

Abe has said his government will decide on the tax issue this autumn.

The sales tax is scheduled to be increased to 10 percent in October 2015.