Finance Minister Taro Aso said Tuesday that the scheduled consumption tax hike and whether to dissolve the Lower House for a snap election should be considered separately.
The tax “has nothing to do with” the question of whether to call an election, Aso, who is also deputy prime minister, told a news conference.
He was commenting on speculation that Prime Minister Shinzo Abe will dissolve the Lower House for a general election to ask voters whether the tax hike from 8 percent to 10 percent should be carried out in October as planned, or postponed again.
Aso added that the economy will continue to recover thanks to fiscal stimulus after government data released Monday showed surprising growth.
“It’s not at all bad,” he said in reference to the 2.1 percent rise in January-March real gross domestic product, apparently rejecting analysts’ view that the headline figure was up due to a technical reason and does not reflect the actual economic situation.
“I knew the economy would improve” as the government is implementing stimulus measures under the fiscal 2019 budget, Aso said.
The increase in inflation-adjusted GDP for the final quarter of fiscal 2018 marked a second straight quarterly expansion, despite weaker exports amid an economic slowdown in China. It beat market forecasts of slower growth or even a contraction.
But the data also signaled sluggish consumption and business investment, adding to the view that the economy will likely be supported by government spending, including on public works projects.
Many private sector analysts said the GDP increase was due to a faster decline in imports than exports, which pushed real GDP higher.
Aso’s comments came amid market speculation that the consumption tax hike may be postponed in a bid to safeguard growth, and that Abe may call a general election this summer to seek voter approval for such a delay.
The government will steer its economic policy while closely watching developments in the U.S. and Chinese economies as well as progress in the execution of the initial fiscal 2019 budget, Aso noted.
Minister of Economy, Trade and Industry Hiroshige Seko also sounded positive about the economy.
Employment and income conditions as well as corporate earnings have remained “extremely firm,” Seko told a separate news conference. “Japan’s economy will remain on a moderate recovering track” with stable capital spending, he said.