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Improved economic signs support consumption tax hike: Hayashi

by Kazuaki Nagata

Staff Writer

Given the improving economic climate, the 3-point consumption tax hike should go ahead as scheduled next April, agriculture minister Yoshimasa Hayashi said at a business conference Monday.

Economic indexes for the April-June quarter say it is “not a red signal, not a yellow signal. I think it’s a green signal” for the hike, said Hayashi at the G1 Global Conference at Tokyo’s Globis University.

Last week, the government revised gross domestic product upward to an annualized rate of 3.8 percent in the quarter, 1.2 points above the preliminary figure, while capital spending rose to 1.3 percent.

Japan needs to deal with swelling social welfare costs as well as fiscal reconstruction, said Hayashi, who was state minister in charge of fiscal and economic policy in Prime Minister Taro Aso’s Cabinet in 2009.

Moreover, if the government delays the hike, one of two scheduled by 2015, the “political cost” will be high because the law will have to be amended, leading to possible rescheduling conflicts among the parties, said Hayashi, speaking as a panelist at the session “A Stronger Japan: Impact on Asia and the World.”

The panelists also touched on such topics as the Trans Pacific Partnership free trade agreement, the 2020 Tokyo Summer Olympics and Prime Minister Shinzo Abe’s economic measures, dubbed “Abenomics.”

Yoshito Hori, president of Globis University, praised Abe’s handling of the economy since regaining the prime ministership in December.

Hori said Japanese firms have suffered from “six barriers” — the strong yen, high corporate taxes, slow progress on bilateral and multilateral free trade agreements, tight regulations on the domestic labor market, stringent goals for reducing carbon dioxide emissions and the threat of electricity shortages.

But, thanks to Abe, the yen has been weakened, TPP negotiations are proceeding and the 25 percent reduction target in carbon dioxide emissions is under review, said Hori.

Robert Alan Feldman, managing director at Morgan Stanley MUFG Securities, sees positive signs from the Abe administration.

For instance, Feldman noted that Abe’s choice for Bank of Japan governor, Haruhiko Kuroda, was made on the basis of clearly defined criteria and not by the usual “insider” process.

“This is a major change of the way the government operates,” he said, adding that Abe is now apparently aiming to adopt this method for appointing senior ministry officials.

The G1 Global Conference also hosted a number of discussion sessions featuring business and political leaders from around the world.