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Gov't panel begins debate on impact of sales tax hike on economy

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(Globalpost/GlobalPost)

A government panel began discussing the possible impact of a scheduled sales tax hike on Japan's economy on Monday, with concern lingering that the measure could thwart Prime Minister Shinzo Abe's efforts to overcome nearly two decades of deflation.

The government plans to hear opinions from 60 people from a variety of backgrounds, including heads of nonprofit groups, scholars and business leaders, to provide Abe with information to decide whether to proceed with the tax hike to 8 percent from the current 5 percent next April.

The panel is slated to hold meetings seven times at the prime minister's office through Saturday, with seven to nine of the 60 members scheduled to meet at one time for around two hours.

Seven speakers on the first day include Kaori Yamane, head of the Japan Housewives' Association, and Hiromasa Yonekura, leader of the Japan Business Federation.

The panel's discussions will be closely watched by financial markets, as some government officials have recently urged Abe to delay the tax increase, arguing it may drag down business and household spending and in turn choke economic growth.

The panel includes tax hike opponents -- in particular, Koichi Hamada, a professor emeritus of economics at Yale University and Abe's special adviser, as well as University of Shizuoka professor Etsuro Honda, another special adviser to Abe.

Hamada and Honda, who want the tax hike postponed or the margin of increase reviewed, are slated to attend meetings on Tuesday and Saturday, respectively.

Economic and fiscal policy minister Akira Amari, who is supposed to attend all the meetings of the panel along with Finance Minister Taro Aso and Bank of Japan chief Haruhiko Kuroda, has said he will brief Abe in early September on the panel's debates.

Abe has said he will make a final decision after hearing opinions from the panel and examining Japan's economic growth data in the April-June period, among other factors. Revised figures for second-quarter gross domestic product are due out Sept. 9.

Under legislation enacted last August, the government plans to raise the sales tax in two steps -- to 8 percent next April and 10 percent in October 2015 -- to cover swelling social security costs at a time when the population is aging.

A sales tax increase is regarded by some international economic organizations as key to Japan's fiscal rehabilitation, as the country's fiscal health is the worst among major developed economies with its public debt level at more than 200 percent of GDP.

==Kyodo

http://www.globalpost.com/dispatch/news/kyodo-news-international/130826/govt-panel-begins-debate-impact-sales-tax-hike-economy