Business / Economy

Japan's consumption tax hike could be delayed again if June data looks 'risky,' Abe aide says

Kyodo

A close aide to Prime Minister Shinzo Abe on Thursday hinted at the possibility that the planned consumption tax hike to 10 percent from 8 percent in October could be delayed, depending on a key economic indicator to be released for June.

If the Bank of Japan’s tankan survey of business sentiment for June “shows a risky outlook,” Koichi Hagiuda, executive acting secretary-general of Abe’s Liberal Democratic Party, said during an online TV program. “We would not take the people toward a cliff. There could be a different development.”

Abe has twice pushed back a plan to raise the consumption tax to 10 percent after the previous hike to 8 percent from 5 percent in 2014.

The government has maintained that it will raise the tax unless Japan’s economy faces a shock on the scale of the global financial crisis triggered by the 2008 collapse of U.S. investment bank Lehman Brothers Holdings Inc.

From time to time, there has been speculation that Abe could put off the planned hike again amid the weak tone of the Japanese economy due partly to a slowdown in exports to China, its largest trading partner.

On the TV program, Hagiuda admitted that the world’s third-largest economy is “slightly deteriorating.”

Although the government maintains that Japan is in the longest economic expansion period since the end of World War II, a key government indicator of economic trends showed in March that the economy may have peaked last fall and already entered a recessionary phase.

Also in the month, the government downgraded its headline assessment of Japan’s economy for the first time in three years in its monthly economic report.

The Japanese central bank will release the quarterly business confidence survey on July 1.

Hagiuda, a House of Representatives member, said it is still possible for the government to delay the tax hike, but he added that the it would have to seek a response from voters in that case.

However, he brushed aside the possibility of the Lower House being dissolved to coincide with the upcoming Upper House election in July, citing tight scheduling due to a Group of 20 summit in late June in Osaka.