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67% of leading Japanese firms back sales tax hike to aid fiscal recovery

Kyodo

Around 67 percent of 111 leading companies believe the planned sales tax hike next April is necessary to help restore Japan’s fiscal health, a survey showed Saturday.

Of the 74 companies in favor of increasing the levy, 35 said the hike should be implemented “if the economy keeps recovering” and another 27 backed the plan “under the current economic situation.” Twelve said they support the move “regardless of the economic situation.”

Legislation enacted in August 2012 under the previous Democratic Party of Japan-led government provides for raising the 5 percent consumption tax to 8 percent in April 2014 and to 10 percent in October 2015.

But some are growing cautious over the potentially adverse effects on the economy, and Prime Minister Shinzo Abe faces a difficult decision in whether or not to go through with it.

The survey, conducted by Kyodo News between late July and early August, covered such major companies as Toyota Motor Corp., Sony Corp., Mizuho Financial Group Inc., Nippon Steel & Sumitomo Metal Corp. and Mitsubishi Corp.

As for their predicted economic outlook at the end of fiscal 2013, 14 of the companies said they expect an “expansion” and 88 a “moderate expansion.” None of the firms forecast a “slowdown” in growth.

In a multiple-answer question on the reasons for optimism, 60 businesses pointed to a recovery in consumer spending, 33 cited the improving U.S. economy and 31 a surge in demand ahead of the sales tax hike.

Meanwhile, 44 companies, or 40 percent of the total, are maintaining a cautious stance on wage increases, as requested by Abe, saying salaries will remain unchanged in fiscal 2013 through next March. However, 29 businesses said wages will be raised.

The survey also found that 96 firms “support” or “somewhat support” Abe’s policies so far, including his “Abenomics” stimulus package centering on drastic monetary easing, massive fiscal spending and a growth strategy.

In a multiple-choice question on specific measures Abe’s government should prioritize, 84 firms cited a steady implementation of the growth strategy, 45 pointed to corporate and other tax reforms, and 29 favored restoring the nation’s tattered public finances.

Asked about the impact of the yen’s depreciation on their operations, 47 companies said it had boosted earnings, while 33 had seen little impact as the mixture of positive and negative effects canceled each other out.

Fifty-one firms cited ¥95-¥105 as the preferable range the yen should be trading at versus the dollar.

Among other findings, 54 companies said they plan to expand capital spending at home or abroad, or both, while 58 believed the resumption of nuclear power is necessary on condition its safety can be assured.

  • YoDude12

    Could this have anything to do with the fact that Abe also supports lowering the corporate tax rate?
    They are going to hang themselves by the neck. Wages are still falling, but sales taxes are going up. Nonsense.

    • Ch

      The aftermath of the previous governments’ failure to address the huge deficit is now here. If sales tax goes up, sales figures will go down for sure. I have asked so many people around and they ALL said they will definitely cut their spending if the tax hikes. If the sales tax doesn’t go up, the deficit will continue to snowball. As long as the government doesn’t face their lessening work force problem, there is only one way the economy will go – down! Australia and United States are two great counterexamples. A more recent one is Singapore.