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Panel is split on wisdom of hiking consumption tax to 10%

Kyodo, Staff Report

Opinion was divided at the first meeting of invited experts on whether the Abe administration should raise consumption tax rate as planned.

The tax is set to rise to 10 percent late next year. The final decision is expected by the end of December, but recent data have shown economic recovery is weaker than expected.

Five of the eight experts who gathered Tuesday said that Prime Minister Shinzo Abe should go ahead with the tax hike to help restore the nation’s fiscal health — the worst among major developed economies. Some of them emphasized the need for additional stimulus.

The other three expressed concern that the planned tax hike would choke private spending and investment, making it more difficult for the Abe administration to achieve its prized goal of beating nearly two decades of deflation.

The experts come from a wide variety of backgrounds, from academia to business to nonprofit organizations.

The administration will hear opinions from around 40 experts in a series of meetings through Nov. 18.

They are expected to discuss whether the tax increase will hamper the success of the “Abenomics” policies and will consider the kind of steps needed to minimize damage to the economy from the hike.

Abe will make a final judgment on the tax hike — scheduled to take place in October, 2015 — by the end of this year, while “comprehensively” taking expert opinions and economic data into consideration, Chief Cabinet Secretary Yoshihide Suga said.

The tax panel began meeting at a time when the Bank of Japan’s unexpected monetary easing on Friday shocked Tokyo financial markets, pushing down the yen against the dollar and stimulating a buying spree since then. As of Wednesday, the dollar reached ¥114.5 in Tokyo and the benchmark Nikkei average surged to its highest level in seven years, ending at 16,937.32.

Among those attending the first of the five meetings were Takatoshi Ito, a professor at the National Graduate Institute for Policy Studies, Akio Mimura, chairman of the Japan Chamber of Commerce and Industry, Nobuaki Koga, president of the Japanese Trade Union Confederation, and Koichi Hamada, Abe’s special adviser on economic affairs and a staunch opponent of the tax increase.

  • Eagle

    Oh, there he here comes applying the boiling frog technique . 8% then 10% then 25%, now starting a currency war with China by going ahead with 80 trillion yen money printing and then looting the government pension investment found. Abe might not need Japan any more. Jumping into a race with China and the U.S. (Japan) to weaken local currency. Want create a total economic collapse or a irreversible financial crisis that has a potential to create war?

    Who is this man working for?

  • J.P. Bunny

    Great idea! Let’s stimulate the economy by giving people the ability to buy even less with the money they still have. Maybe Abe is hoping for another better-buy-a-bunch-of-stuff-before-the-price-goes-up economic bump.