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No need to hastily raise sales tax: Abe adviser Hamada

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(Globalpost/GlobalPost)

Koichi Hamada, an economic adviser to Prime Minister Shinzo Abe, said Wednesday the government "doesn't have to rush" to implement a planned sales tax hike unless Japan's economy and the labor market fully recover.

While the Abe administration plans to make a final judgment in fall on whether to raise the tax rate to 8 percent from the current 5 percent next April, Hamada's call for possibly delaying the schedule as an option could affect the premier's decision.

If the consumption tax rate is lifted earlier than the economy recovers, tax revenue sources would dry up, the 77-year-old professor emeritus of economics at Yale University said, apparently referring to the Japanese economy's possible shrinkage after the tax hike.

"It would be advisable (to carry out a sales tax hike) if the Japanese economy shows signs of improving to the same level as before 2008, when it was relatively good, and worries disappear," he said in an interview with Kyodo News.

Hamada, meanwhile, indicated a consumption tax hike is inevitable in the long run to restore Japan's fiscal health, the worst among industrialized nations.

The sales tax rate is scheduled to be further raised to 10 percent in October 2015.

Legislation enacted last August stipulates as a nonbinding target for the consumption tax hike that the government will seek to accomplish nominal economic growth of around 3 percent and real growth of about 2 percent.

Japan's economy expanded at an annualized rate of 4.1 percent in the first three months of 2013 in inflation-adjusted terms, marking the second straight quarter of growth.

As for the Bank of Japan's drastic monetary easing steps introduced in April, Hamada said, "It has been working very well."

Even though the central bank cannot achieve its 2 percent inflation target within two years, the BOJ's leadership "does not have to take responsibility" if full employment is almost attained and the economy is on a growth path, he added.

Hamada, who has served as one of the prime minister's special advisers since the Abe administration was formed on Dec. 26, is known as an advocate of a reflationary approach aimed at realizing an economic recovery by pushing up prices through monetary easing.

The foundation of Abe's economic policies dubbed "Abenomics," entailing aggressive monetary easing and large-scale public works projects, is largely influenced by the policy views of Hamada, analysts said.

==Kyodo

http://www.globalpost.com/dispatch/news/kyodo-news-international/130710/no-need-hastily-raise-sales-tax-abe-adviser-hamada