The economy will probably withstand the consumption tax increase that took effect Tuesday as Prime Minister Shinzo Abe prepares stimulus measures and companies raise wages, the new head of the bank lobby said.
Abe remains on track to achieve his goal of ending deflation after embarking on unprecedented monetary easing and fiscal spending a year ago, Nobuyuki Hirano, who replaced Takeshi Kunibe on Tuesday as chairman of the Japanese Bankers Association, said in an interview. Hirano is president of Mitsubishi UFJ Financial Group Inc., Japan's biggest bank.
The increase of 3 percentage points to 8 percent may trigger the deepest one-quarter economic contraction since the March 2011 quake, economists surveyed by Bloomberg estimate. The administration plans to front-load budget spending to help weather the blow from the higher levy, and the Bank of Japan has signaled that it's ready to boost easing if needed.