• Kyodo


The administration may submit an extra budget to the Diet early next year to stimulate the economy amid fears over the negative impact of the planned consumption tax hike in April, Finance Minister Taro Aso said Tuesday.

Aso, also deputy prime minister, again indicated that the administration may draft a supplementary budget amid concerns the consumption tax increase may hamper efforts to beat the chronic deflation besetting Japan.

“If we need certain countermeasures, then they would be discussed in the ordinary Diet session next year,” Aso said.

The ordinary session normally runs from January to June. The extra budget would finance measures to underpin economic growth by easing the possible negative impact the planned tax hike would have on business and household spending.

Under legislation enacted last year, the 5 percent consumption tax will be raised to 8 percent in April and then to 10 percent in October 2015 to pay for the swelling welfare costs brought about by the aging population.

Prime Minister Shinzo Abe has said he will determine this fall whether to raise the politically sensitive tax as scheduled after looking into recent economic indicators and listening to experts.

The government held hearings last week on the issue, at which 60 experts, including economists, business leaders and consumer group chiefs, gave their opinions.

A majority of the experts expressed support for the tax hike plan, with most urging the administration to take steps at the same time to safeguard the nascent economic recovery, including compiling an extra budget or reducing other taxes, according to government officials.

Others joining the hearings, including two economic advisers to Abe, opposed the scheduled tax increase, saying he should consider revising the plan and focus for now on fighting deflation.

Salary slide lengthens


Salaries extended their longest slide since 2010 in July, raising the stakes on Prime Minister Shinzo Abe’s decision on whether to raise the consumption tax.

Regular wages excluding overtime and bonuses dropped 0.4 percent from a year earlier, marking a 14th straight month of decline, according to data released Tuesday by the Health, Labor and Welfare Ministry. Bonus payments rose 2.1 percent, helping to lift total cash earnings 0.4 percent.

Boosting workers’ incomes is key to the success of Abe’s efforts to resuscitate the economy after doses of fiscal and monetary stimulus helped weaken the yen and start a recovery, boosting corporate profits.

With salaries sliding and consumer prices rising in July at the fastest pace since 2008 on higher energy costs, a sales tax increase could squeeze households, threatening the success of “Abenomics.” Amid the weak yen, the costs for imports, ranging from fuel to food, have steadily risen amid the flat wage situation.

“Companies aren’t confident enough on the sustainability of the economic recovery,” said Yoshimasa Maruyama, chief economist at Itochu Corp. “If wages don’t improve much, it may pose a political risk” to Abe’s administration, he said.

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