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Abe sees need to consider steps to ease impact of sales tax hike

Prime Minister Shinzo Abe said Tuesday the government should study specific steps to cushion the impact of the planned consumption tax hike in 2019 on the economy.

 

“We will need to consider specific measures to control fluctuations in the economy, such as through a drop in demand following (an expected) last-minute surge due to the consumption tax hike,” Abe told a policymaking panel meeting at his office.

 

He made the remark after private-sector members of the Council on Economic and Fiscal Policy proposed that the government should include ways to limit the adverse impact on spending in a state budget for the fiscal year starting in April 2019.

 

Under the current plan, the government will raise the consumption tax rate from 8 percent to 10 percent in October next year.

 

As Tokyo is set to host the Olympics and Paralympics in 2020, the panel members also asked the government to learn from the experience of Britain that had made investment plans beyond its hosting of the London Olympics in 2012 to support its economic growth.

 

Japan’s economy has marked eight straight quarters of growth through December, the longest expansion streak in 28 years, helped by strengthening domestic demand.

 

After the government raised the sales tax to the current 8 percent from 5 percent in 2014, private consumption was depressed and it took a while to recover.

 

The private-sector members stressed the need to raise prices of goods “in a flexible manner” rather than all at once following the tax hike.

 

Stronger domestic demand is seen as critical for Japan to defeat deflation. After years of the “Abenomics” policy mix that includes bold monetary easing by the Bank of Japan, the world’s third-largest economy has yet to achieve the goal.

 

The recent nomination of Haruhiko Kuroda, the current BOJ governor, for another term through 2023, has raised market expectations that the central bank will be in no rush to explore an exit from its radical monetary easing.

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