Prime Minister Shinzo Abe won’t announce his decision on whether to raise the consumption tax until Oct. 2, after examining the results of the next Bank of Japan “tankan” business sentiment survey, a government source said Tuesday.
The Abe administration has been carefully studying the possible negative impact of a consumption tax hike on the nascent economic recovery, amid concern it could weigh on business investment and household spending.
Abe said Tuesday that he wants to look at the tankan, due out Oct. 1, as “the last economic indicator” before making up his mind in “early October,” according to economic and fiscal policy minister Akira Amari.
The government source later acknowledged that Abe is eyeing Oct. 2. If so, Abe is likely to brief other countries’ leaders on his decision when he attends the summit of the Asia-Pacific Economic Cooperation forum from Oct. 7 to 8 in Indonesia.
The BOJ releases a new tankan every three months. The diffusion index covering both manufacturing and nonmanufacturing sectors represents the percentage of companies reporting favorable business conditions minus those reporting unfavorable conditions.
Abe met Tuesday with Amari and Finance Minister Taro Aso and was briefed on the results of last week’s government hearings on the tax hike with 60 experts.
More than 70 percent of the experts, including economists and business leaders, expressed support for the plan, with most urging the government to take steps to prevent the economy from slowing, such as compiling an extra budget or reducing other taxes.
But other experts at the hearings — including two economic advisers to Abe — were opposed to the scheduled tax increase, saying the prime minister should consider revising the plan and focus on beating chronic deflation.
Under legislation enacted last year, the government plans to raise the consumption tax from 5 percent at present to 8 percent next April and to 10 percent in October 2015 to pay for growing welfare costs.
Abe had said he would make the final decision this fall after considering various economic indicators, most notably revised growth figures for the April-June quarter to be released Sept. 9.
Abe also told Aso and Amari that he wants to enhance his economic policy, dubbed “Abenomics,” instructing them to prepare for an extraordinary Diet session this fall.
The order will likely lead the administration to submit bills for stimulating growth through tax reductions and other measures to help boost capital spending.
“I want you to consider every possible measure to strengthen Abenomics,” Abe was quoted by Amari as saying.