Toyota chief calls for sales tax hike along with economic measures

Toyota Motor Corp. President Akio Toyoda on Wednesday threw his support behind a planned sales tax hike, but asked the government to take necessary measures to ensure sustainable economic growth if Prime Minister Shinzo Abe is to proceed with the tax increase as scheduled next year.

"I favor a consumption tax hike in order not to pass the bills on to future generations, but I want (the government) to consider how to help the country's economy achieve sustainable growth," Toyoda told reporters after attending a government panel hearing on the tax issue.

Toyoda, who is serving as Japan Automobile Manufacturers Association chairman, also said he urged Abe's administration to reform the car taxation to prevent automobile sales from languishing following the tax hike.

The panel, which began hearings on Monday, will listen to a total of 60 people from a variety of sectors. It will hold sessions every day through Saturday and report to Abe before he makes up his mind as early as next month.

Former Deputy Governor of the Bank of Japan Kazumasa Iwata was among those who proposed the government implement steps to ease the potential downward pressure on domestic demand if it raises the sales tax rate as planned.

Under legislation enacted last year, the consumption tax is supposed to be raised in two steps from the current 5 percent to 8 percent next April and 10 percent in October 2015, aimed at covering swelling social security costs as the population is aging.

However, some experts have asked the government to delay the scheduled tax hike or review the margin of increase, amid growing concern that it may choke consumer and business spending, in turn hampering Abe's efforts to beat Japan's nearly two decades of deflation.

Koichi Hamada, Abe's special advisor, told reporters after a meeting of the panel on Tuesday that he told the government to postpone the planned sales tax hike by a year to safeguard Japan's nascent economic recovery.

The professor emeritus of economics at Yale University and mastermind of the prime minister's "Abenomics" policies, however, said in a TV program Wednesday that Abe's administration should still push through the tax hike one year later, even if the economy is not on an upward trend at that time.

Hamada said if Japan continues to delay a consumption tax hike, it could hurt the nation's fiscal discipline, affecting the sovereign debt market.

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.

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.