Japan has to decide carefully on sales tax hike: Abe adviser

Koichi Hamada, an economic adviser to Prime Minister Shinzo Abe, repeated his view Saturday that Japan should carefully decide what to do with a planned sales tax hike depending on economic conditions.

"It's going to be a real shock to the economy," Hamada said in a speech in Tokyo, referring to the government's plan to raise the sales tax rate to 8 percent next April and to 10 percent in October 2015.

The consumption tax rate is now 5 percent nationwide. The world's third-largest economy is showing signs of recovery as a result of Abe's economic policies dubbed "Abenomics."

The 77-year-old professor emeritus of economics at Yale University added that "the Japanese economy slumped" after the sales tax rate went up to 5 percent from 3 percent in 1997.

In his previous speeches, however, Hamada indicated that a consumption tax hike is inevitable in the medium to long term to restore Japan's fiscal health, the worst among industrialized nations.

Hamada again voiced concern about the fiscal health, saying, "It is in a very worrisome state."

As for the corporate tax burden in Japan, he said it is heavy by international standards and stressed the need to cut the taxes to attract foreign investment.

The government plans to make a final decision this fall on the sales rate hike.

Earlier this week, Hamada said the government should consider as an option raising the sales tax rate gradually by 1 percent at a time.