In weekend press, The Wall Street Journal reports that Japan’s government is ‘split’ on the question of the sales-tax hike:
- Government economic ministries are eager to stick to the plan to raise the tax in April
- But some of the prime minister’s economic advisers fear the tax increase may kill off what economic recovery there is
- Economic adviser Etsuro Honda is calling for a more incremental approach to raising the tax (as is Koichi Hamada),
- Says of raising the 5% national sales tax to 8% in April:”It’s a very sensitive time, when people’s deflationary mind-set may finally be changing into inflationary expectations,”… “People’s feelings can easily change. We shouldn’t step on the gas and put on the brakes at the same time. That’ll send out a confusing message.”
Asked about warnings from proponents of the tax hike—including the International Monetary Fund—that any delay in the increase would lead to a loss of confidence in Japan’s commitment to putting its fiscal house in order and may trigger a debt crisis, Mr. Honda said overcoming deflation and realizing growth was the quicker route to reducing the debt, now more than twice the size of the economy.
“Exiting deflation is the top priority. Fiscal consolidation is important, but exiting deflation makes it easier to achieve that. And Mr. Abe understands that,” the adviser said.
Abe Government Split On Sales-Tax Hike (The Wall Street Journal is often gated, so if you’re unable to access the article try a search of Google news using the headline)