Abe adviser says sales tax hike should be delayed for a year

Kyodo

The government should postpone the planned sales tax hike next April by a year to ensure Japan’s exit from deflation, a special adviser to Prime Minister Shinzo Abe said Tuesday.

Koichi Hamada, a professor emeritus of economics at Yale University and the mastermind of the prime minister’s “Abenomics” policies, said the consumption tax increase could weaken the positive effects of the policies.

“Raising the sales tax would have various strong impacts, which could hamper (the effects of) Abenomics in boosting the economy and beating deflation,” Hamada told reporters after attending a meeting of a government panel studying the possible impact of a sales tax hike on the country’s nascent economic recovery.

“I am going to tell the prime minister that there is a risk,” Hamada added.

Under legislation enacted last year, the 5 percent sales tax would be hiked to 8 percent in April and to 10 percent in October 2015. Hamada said he had proposed at the panel meeting that both rises be delayed by a year.

He also said the government should have the option of raising the levy by 1 percentage point every year for five years to limit the adverse impacts on the economy.