Japan panel urges
government to impose delayed sales tax hike to balance
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[May 25, 2017]
By Tetsushi Kajimoto
(Reuters) - Japan must not delay a sales tax hike scheduled for October
2019 as the revenue is needed to cover bulging social security costs and
achieve the target of balancing the budget in four years, an advisory
panel to Finance Minister Taro Aso said on Thursday.
The Fiscal System Council made the proposal to the minister and called
for fiscal reform to stabilize Japan's fragile economy and mitigate
"The sales tax hike must be implemented. It is Japan's international
commitment and indispensable to bring the primary budget into the
black," said Sadayuki Sakakibara, council head and the chief of
Keidanren, Japan's biggest business lobby.
Failure to meet the target could hit Japan's sovereign credit ratings,
With Japan's public debt more than double its $5 trillion economy, the
finance ministry hopes the proposal will be reflected in mid-year policy
guidelines to be drawn up by Prime Minister Shinzo Abe's top economic
Abe has twice delayed the planned tax increase to 10 percent after the
2014 hike to 8 percent from 5 percent hurt consumers and tipped the
world's third largest economy into a recession.
The delays fueled doubt about Abe's resolve on fiscal reform, while
central bank's massive government bond purchases keep government's
borrowing costs low.
The fiscal council rebuffed a suggestion by some academics that Japan
should put into practice a theory that price levels should be set by
fiscal policy, which is aimed at accelerating inflation through expanded
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Chairman of Japan Business Federation (Keidanren) Sadayuki
Sakakibara attends a news conference in Tokyo, Japan, January 23,
2017. REUTERS/Toru Hanai
unsure whether government bonds can win trust once Japan gives up fiscal
discipline despite its public finances being the worst among advanced
countries." the report noted.
"There's no change to our stance to squarely tackle spending reform, raise the
sales tax as promised and achieve in fiscal 2020 a primary budget surplus"
excluding new bond sales and debt servicing.
On Wednesday, former Federal Reserve chairman Ben Bernanke said in Tokyo the
Bank of Japan may need to coordinate a fiscal spending plan with the government,
allowing for inflation to accelerate above 2 percent without worsening the debt
The Cabinet Office estimates Japan's primary deficit will be 8.3 trillion yen
($74.37 billion) in the year ended March 2021 even assuming rosy growth
projections, suggesting more efforts are needed to raise tax revenue and curb
welfare spending to balance the budget.
($1 = 111.6100 yen)
(Reporting by Tetsushi Kajimoto; Editing by Richard Borsuk)
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