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Abe to decide after G-7 summit on whether to hike consumption tax: aide

Kyodo

Prime Minister Shinzo Abe will make the decision on whether to go ahead with a consumption tax hike planned for April 2017 based on the outcome of the Group of Seven summit this May, an aide said Saturday.

“Consumption has remained low because of a tax increase slated for next year. It should be suspended soon,” said Etsuro Honda, one of the key architects of the prime minster’s Abenomics economic policy, during a television program.

The issue of whether to implement the planned tax rate increase from the current 8 percent to 10 percent has turned into a “competition” between officials supporting the hike and those against it, he said.

Finance Ministry officials who back the plan are urging Abe “almost every day” to carry out the hike, said Honda, a former Finance Ministry official.

Abe told the Diet Friday he will make a decision after “carefully” assessing current economic conditions.

The May 26-27 summit in Mie Prefecture is expected to cover topics such as global economic stability. The G-7 comprises Britain, Canada, France, Germany, Italy, Japan and the United States.

Honda advised Abe in 2014 to consider delaying the tax increase to 10 percent, which was initially planned for October 2015. Abe said in November 2014 he would postpone the tax hike and dissolved the House of Representatives for a general election.

The prime minister is currently convening a series of seminars to hear the opinions of Japanese and international experts to assess the state of the global economy and help him make the decision on the consumption tax.

Among the experts, Columbia University professor and Nobel Prize-winning economist Joseph Stiglitz attended the first of the seminars Wednesday and urged the government to forgo a tax hike given the dismal global economic outlook this year.

Finance Minister Taro Aso told the Diet on Thursday that his views differ from those of Stiglitz, saying, “Currently, we would like to raise the tax to 10 percent in April 2017, as scheduled.”

Aso said Abe’s view is “not apart” from his own and that of the Finance Ministry.

Harvard University economics professor Dale Jorgenson said Thursday in the second session that Japan needs to raise the consumption tax for its economic growth, without specifying the best timing for the hike.

American economics professor Paul Krugman, also a winner of the Nobel Prize, will take part in a session on Tuesday.

The government also plans to invite experts on energy and the Chinese economy to speak at the sessions, Honda said during a television program.

Honda has been serving as a special adviser to the Cabinet since the start of the Abe administration in December 2012. The Abenomics policies he helped formulate are aimed at beating deflation and putting the nation on a sustainable recovery path.

Honda will leave soon to take up his new post as the ambassador to Switzerland.