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Abe to decide on sales tax in early Oct. after weighing Tankan

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(Globalpost/GlobalPost)

Prime Minister Shinzo Abe said Tuesday he will decide in early October whether to raise the sales tax in April as planned, after examining the results of the Bank of Japan's Tankan business sentiment survey due out Oct. 1.

The government is carefully studying the possible negative impact on the nation's nascent economic recovery from the consumption tax hike amid fears it could weigh on business investment and household spending.

"The prime minister said he will make a decision in early October and that he wants to check the BOJ's Tankan as the last economic indicator" before making up his mind, economic and fiscal policy minister Akira Amari told reporters.

The central bank releases the data every three months. The diffusion index covering both manufacturing and nonmanufacturing sectors represents the percentage of companies reporting favorable business conditions minus that of firms describing unfavorable environments.

Abe earlier Tuesday met with Amari and Finance Minister Taro Aso at his office and was briefed on the results of last week's government hearings of the views of 60 experts about the tax hike plan.

More than 70 percent of the experts, including economists and business leaders, expressed support for the plan, with most urging the government to take steps at the same time to prevent the economy from slowing down, such as compiling an extra budget or reducing other taxes, government officials said.

But others joining the hearings -- including two economic advisers to Abe -- were opposed to the scheduled tax increase, saying the premier should consider revising the plan and focus on beating chronic deflation in the country.

Under legislation enacted last year, the government plans to raise the tax rate from 5 percent now to 8 percent next April and to 10 percent in October 2015 to secure funds needed to pay the swelling welfare costs brought about by the nation's graying population.

Abe had said he would make the final decision this fall after considering various economic indicators, most notably the revised April-June quarter growth figures for the economy to be released on Sept. 9.

Abe also told Aso and Amari that he wants to enhance his economic policy, called "Abenomics," instructing them to prepare for an extraordinary Diet session starting this fall.

The order will likely lead the government to submit bills for stimulating growth through tax reduction and other measures to help boost corporate capital spending.

"I want you to consider every possible measure to strengthen Abenomics," Abe was quoted by Amari as saying.

Also Tuesday, Aso said the government may submit an extra budget to the Diet early next year to stimulate the Japanese economy amid fears it could suffer from the planned sales tax increase.

Aso, who doubles as deputy prime minister, again indicated that the government may draft a supplementary budget for the current fiscal year through March that would finance measures to underpin economic growth.

"If we need certain countermeasures, then they would be discussed in the ordinary Diet session next year," he told a press conference.

The ordinary parliamentary session is normally held from January to June.

==Kyodo

http://www.globalpost.com/dispatch/news/kyodo-news-international/130903/abe-decide-sales-tax-early-oct-after-weighing-tankan