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Real gross domestic product rose an annualized 2.6 percent in the three months to June, the Cabinet Office announced Monday, bolstering the government’s claim that Prime Minister Shinzo Abe’s economic policy is continuing its run of success, if at a slightly slower pace than most economists had projected.

On a quarterly basis, the economy grew 0.6 percent in the April-June period.

Debate now centers on whether the growth is enough to sustain momentum for the planned consumption tax hike next April.

“This was satisfactory growth for the economy; it gives the impression that things are on the right track,” Yasuo Yamamoto, senior economist at Mizuho Research Institute, told The Japan Times.

Though positive news, Monday’s data fell short of the more than 3 percent growth predicted by economists for the quarter.

“Still, this isn’t the kind of growth that calls into question the government’s tax hike. Rather, it is a statistic that encourages them to go through with it,” Yamamoto added.

The Diet last year passed a bill to raise the 5 percent consumption tax to 8 percent in April 2014, and then to 10 percent in 2015. However, a clause in the law stipulates the hikes are contingent on robust economic growth.

So far, Abe’s economic stimulus coupled with the Bank of Japan’s ultraloose monetary policy have hit the sweet spot.

In the first quarter, GDP grew an annualized 3.8 percent, making the latest quarter the third straight to see an increase.

Consumption rose a real 0.8 percent, also up for the third consecutive quarter, while exports expanded 3.0 percent, the second straight rise.

“The economy is clearly recovering,” Abe told reporters Monday. “This is stable growth,” economic and fiscal policy minister Akira Amari added.

Still, some developments suggest the government is having second thoughts about the tax jump to 8 percent in April.

In a speech last month, Abe’s economic adviser, Koichi Hamada, proposed a more gradual 1 percentage point uptick at the start.

Etsuro Honda, another economic expert serving Abe, said in an interview with Jiji Press last month that a 1 percentage point annual hike “is the realistic way” to achieve both economic growth and fiscal stability.

“The economy’s recovery isn’t strong enough to withstand a tax increase to 8 percent or 10 percent,” he said.

Tax-hike skeptics point to the swift slump that followed the last tax hike, from 3 percent to 5 percent, in 1997.

Some argue higher taxes will hamper growth again, just as the economy is only now beginning to show signs of shaking off the malaise of 15 years of deflation.

At the other end of the spectrum, advocates of a tax hike say it needs to happen soon and on a larger scale.

A recent report by the International Monetary Fund asserted that the consumption tax would have to be 15 percent for there to be any hope of reining in Japan’s public debt.

BOJ Gov. Haruhiko Kuroda also warned last week in a news conference that failure to raise the tax “may have a negative impact on the effect of monetary easing,” while insisting that economic growth could still be achieved.

Mizuho Research Institute’s Yamamoto said Monday’s GDP data are good news for the supporters of the tax hike.

Private consumption grew by 0.8 percent, while exports jumped 3.0 percent and imports 1.5 percent.

Business spending remained weaker than expected, with capital expenditures falling 0.1 percent, but Amari gave assurances that the government will continue to support the business sector with new growth strategies.

“Overall, I think the economy is showing balanced growth led by public spending and increased exports,” Yamamoto said.

Cabinet members, however, disagree over the timing of a final decision on the tax hike.

Finance Minister Taro Aso has indicated he thinks the Group of 20 meeting in Russia would be the perfect platform. Others like Chief Cabinet Secretary Yoshihide Suga have said the administration should wait until early October to come to a conclusion. The debate will probably carry on for another month.

The government is scheduled to convene a panel of experts to discuss the pros and cons of a tax hike in late August, and then study the finalized GDP quarterly statistics, to be released on Sept. 9, before making its final decision.

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