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Tax hike debate expected to heat up

Kyodo

Debate on how the planned sales tax hike will affect the economy is expected to heat up when a government panel begins gathering expert opinions Monday.

A Kyodo News poll said Saturday that at least 10 of the 60 panel members surveyed favor proceeding with the tax hike to 8 percent from 5 percent next April, and to 10 percent in October 2015. Responses from 20 members had been obtained as of Saturday.

Some of the members who had not replied by Saturday represent corporate and labor sectors that see a need for the tax hike. The law enacted last August says the extra revenue is needed to cover swelling social security costs being driven by the inexorable expansion of the elderly population.

But the outlook for the discussions remains uncertain because the panel also includes tax hike opponents.

Among those who responded, six said the timing should be postponed or the size should be reviewed, while two opposed the hike outright and two fudged their positions.

The panel, set up by the government of Prime Minister Shinzo Abe, will discuss the matter for six days until Saturday and report its findings to Abe, who said he will make the final decision by early October after taking in the panel’s opinions and other factors, including economic data.

In their replies to, Koichi Hamada, a special adviser to Abe and a professor emeritus of economics at Yale University, and Etsuro Honda, a University of Shizuoka professor who is another special adviser to Abe, said they want the tax hike postponed or the margin of increase reviewed.

Hamada is pushing for a delay because he thinks the economy isn’t yet strong enough to handle it, while Honda says the tax hike should proceed but at a rate of 1 point per year over five years.

Among the other panelists were Hiromasa Yonekura, leader of the Japan Business Federation, also known as Keidanren. Yonekura expressed concern that any failure to hike the sales tax will cause interest rates to surge and create chaos in the financial system.

Many respondents surveyed also called for economy-boosting measures, with nine out of 20 urging the compilation of an extra budget and others pushing for corporate or income tax cuts.

Tax call to precede APEC

Economic and fiscal policy minister Akira Amari said Sunday that Prime Minister Shinzo Abe will make a final decision on whether to raise the consumption tax in April before attending the APEC leaders’ meeting on Oct. 7 in Indonesia.

“While it has not yet been decided when the prime minister will reach the final decision, and it depends on him, I think the timing will be between late September and early October,” Amari said on NHK.

He also hinted that Abe is likely to refer to the Bank of Japan’s “tankan” business sentiment survey due on Oct. 1 before making up his mind.

After the program, he told reporters that key Cabinet members have been sharing the view that the prime minister will come to a decision before the APEC meeting.