Prime Minister Shinzo Abe will make a final judgment Oct. 1 on whether to raise Japan's sales tax rate next April to 8 percent from the current 5 percent, economic and fiscal policy minister Akira Amari said Monday.
If Abe decides to carry out the tax hike, the government needs to announce at the same time a package of measures to prevent the tax increase from hurting the economy, which has recently shown signs of emerging from nearly two decades of deflation, Amari said in a speech in Tokyo.
Amari said the government has to draw up a stimulus package worth more than 2 trillion yen in order to keep the economy on a growth path after the tax hike.
Earlier in the day, Amari indicated that the tax increase is likely, as Japan's annualized real economic growth rate in the three months through June was revised upward to 3.8 percent from 2.6 percent in the preliminary report.
"It's a good figure," Amari told reporters following the release Monday of the revised April-June gross domestic product data, adding the effects of Abe's economic policies dubbed "Abenomics" have "been steadily emerging."
Amari also said the success of Tokyo's bid to host the 2020 Summer Olympics is "extremely bright news," suggesting he believes it would prompt Abe to proceed with the first round of a two-stage increase to 10 percent in October 2015 to cover swelling social security costs as Japan's population ages.
Chief Cabinet Secretary Yoshihide Suga said at a press conference Monday, "I honestly think (the growth rate) was better than I expected...The prime minister will make a judgment (on the tax matter), taking this into account."
Suga, the government's top spokesman, said the announcement of Tokyo as the host of the Olympic Games is likely to bring about "an extremely large economic effect."
But he added that he does not know yet how large this would be, nor would he say if Abe will consider the potential impact of holding the Olympic Games on the economy when he decides on the tax hike.
With speculation growing that Abe will lift the consumption tax rate as planned next April, many lawmakers within his ruling Liberal Democratic Party urged the premier to do so to restore Japan's fiscal health, the worst among industrialized nations.
At a meeting of the LDP tax panel on Monday, all lawmakers who expressed opinions supported the tax hike.
"The Japanese economy has taken steps in a good direction in a steady manner," panel chief Takeshi Noda told reporters, emphasizing the environment necessary for the tax hike is being established.