The government should prioritize expanding its recent sales tax increase or risk an eventual collapse of sovereign bonds, former Finance Ministry official Eisuke Sakakibara said.
A failure to raise the consumption levy "could trigger massive dumping" of the nation's debt, Sakakibara said in an interview in Tokyo last week. "We must not derail from boosting the levy to 10 percent. The bond market's collapse would be more dire than a tax increase."
Prime Minister Shinzo Abe has indicated he will decide by the end of this year whether to go ahead with the sales tax increase to 10 percent in 2015, weighing the economic fallout of the 3-percentage-point gain to 8 percent this month. Gross domestic product may contract an annualized 3.3 percent in the second quarter, the sharpest drop since the first three months of 2011, according to a Bloomberg News poll of economists.