Finance Minister Taro Aso expressed his eagerness Tuesday to craft an extra budget to prevent a planned sales tax hike next April from dragging down the economy.
"We should limit the impact (of the tax hike) on the economy. We need to consider compiling a supplementary budget" early next year, Aso said at a press conference.
Aso also said that whether to carry out the planned tax hike should be decided "sooner rather than later," indicating the government will determine a direction before the Group of 20 summit is held in early September in St. Petersburg.
But he added he wants a final judgment on the matter to be made in September after the G-20 summit, while Prime Minister Shinzo Abe has suggested the decision may be made in October.
"We have internationally pledged" to implement the consumption tax hike, Aso said, reiterating his intention to raise the tax rate to 8 percent from the current 5 percent as scheduled.
Data on Japan's gross domestic product in the April-June period, due out Aug. 12, will be one of the key indicators for the government's decision on the tax matter, said the finance minister.
Some lawmakers and government officials have called on Abe to put off the tax hike, arguing it is likely to dampen consumer spending and in turn the economy, which has shown signs of breaking out of nearly two decades of deflation.
Legislation enacted last August stipulates that the government will seek to accomplish nominal economic growth of around 3 percent and real growth of about 2 percent, as a nonbinding target for the sales tax hike.
Japan's economy is estimated to have grown at an annualized rate of around 3 percent in inflation-adjusted terms in the second quarter from April to June, surpassing the growth target, a survey of economists conducted by Kyodo News showed last week.
The consumption tax rate is scheduled to be finally increased to 10 percent in October 2015.
Recently, some of Abe's advisors such as Koichi Hamada, professor emeritus of economics at Yale University, have urged the government to consider as an option raising the sales tax rate gradually by 1 percent at a time, but Aso brushed off the idea.
"We'll never dance to another tune," Aso said.
The possible extra budget for this fiscal year through March 2014 is expected to include a benefit plan for home purchasers, government officials said.