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Abe to hear from experts before final decision on tax hike

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(Globalpost/GlobalPost)

Prime Minister Shinzo Abe will call for opinions from about 50 experts on the economy and finance before deciding on whether to raise Japan's sales tax in April as planned, officials said Thursday, amid fears a tax hike could suppress the nation's nascent economic recovery.

Abe instructed ministers concerned to set up a panel to hear from these experts and "intensely discuss" the possible impact on the economy of the tax hike, meant to improve the country's fiscal health, the worst among major developed economies, according to the officials.

After receiving a wide range of opinions, Abe is expected to decide, possibly in late September or early October, whether to raise the tax rate as planned, economic and fiscal policy minister Akira Amari told reporters.

The government plans to increase the tax rate to 8 percent from the current 5 percent next April, and to 10 percent in October 2015 as legislated last year. The policy has been welcomed by international bodies as a step to help cover swelling welfare costs in Japan, where the population is aging.

The panel will consist of Amari, Finance Minister Taro Aso, Bank of Japan Governor Haruhiko Kuroda and corporate executives from another government panel on economic and fiscal policies. It is scheduled to meet several times later this month to hear from the experts.

While many government and private-sector officials say Japan should raise the tax as planned to maintain its credibility in the international community and financial markets, the hearings are likely to consider the options of postponing the tax hike to sustain economic growth and revising the legislation to slow the pace of tax rate increase.

The panel will end hearings in early September before reporting to Abe.

Concerns are spreading within his administration that the planned consumption tax increase could weigh on business and household spending and make it more difficult for the country to exit from chronic deflation.

"It is desirable to lift (the tax rate) by 1 percent a year for five years from next April to minimize any shock to the economy, Etsuro Honda, a University of Shizuoka professor and special adviser to Abe, said Thursday in an interview with Kyodo News.

Honda, a former Finance Ministry official who is expected to join the panel, added he has already explained the idea to Abe.

If the tax rate is jacked up by 3 percent in one go as planned, it would heighten risks of the economy stalling, Honda said.

Abe has said he will make a final decision on the tax hike after looking at the nation's economic growth in the April to June period among other factors. Revised figures for second-quarter gross domestic product are due out on Sept. 9.

"I will absorb every kind of knowledge (from the experts) and make the final decision by considering both economic growth and fiscal restoration," Abe told ministers on Thursday, according to the officials.

The panel will call for opinions from economists, business lobbies and labor unions. It will also hear from people who oppose the planned increase, including Honda and Koichi Hamada, who is a professor emeritus of economics at Yale University and another special adviser to Abe.

==Kyodo

http://www.globalpost.com/dispatch/news/kyodo-news-international/130808/abe-hear-experts-final-decision-tax-hike