Business / Economy

BOJ exec shrugs off tax increase slowdown fears

Kyodo

A Bank of Japan policymaker Thursday shrugged off the possibility that the consumption tax hike on April 1 could significantly slow the economy, echoing the central bank’s bright projections.

“Although being affected by strong demand before and a decline following (the April 1 tax hike), the economy will continue to grow at a pace beyond its potential without being weighed down,” Yoshihisa Morimoto, a member of the BOJ Policy Board, predicted in a meeting with Akita Prefecture business leaders.

The BOJ says the economy is expected to continue its moderate recovery after getting over the tax hike, which raised the rate to 8 percent from 5 percent, despite analysts’ fears it will weaken household and business spending ahead of a second hike due in 2015.

The BOJ believes the adverse effects of the tax hike will fade as early as this summer.

“While individual consumption remains solid on improving employment and income situations, we believe exports and business fixed investment will also increase moderately as a trend,” Morimoto said.

But he also pointed out that as manufacturers have shifted production abroad, exports have weakened, and that the scenario for a moderate export recovery has downside risks, such as a potential slowdown in overseas economies, particularly emerging markets.

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