As Japan will be taking part of the Group of 20 (G20) summit in Russia, Finance Minister Taro Aso said on Tuesday that Prime Minister Shinzo Abe will be telling the participating nations that his administration will be proceeding with the planned two-stage sales tax hike, a strategy that intends to tighten the country’s fiscal belt. Aso, who will be accompanying Prime Minister Abe to the G20 summit, also added that Japan will be considering compiling extra budget for fiscal spending to ease the pain on the economy.
Aso also said that Japan is unlikely to face criticism from other countries this time about the yen’s weakness that boosts the competitive advantage of its exports. Prime Minister Abe’s aggressive fiscal policies have given Japan’s export-based economy a boost at the start of the year, but industry experts are now looking for sustainable growth for Japan’s chronically sluggish economy. “Japan has launched fiscal and monetary stimulus to pull out of deflation. The yen’s weakness was only a side-effect of that ultimate goal of beating deflation,” Aso said in a news conference after a regular cabinet meeting. Japan is eager to remain in good standing with the G20, and previously, Japan has pledged that it will make efforts to rein in its ballooning public debt which, at this point, is double the size of its US$5 trillion economy – the biggest debt among industrialized nations. The sales tax hike is one of Japan’s strategies to rein in the debt.
Abe is still scheduled to make his final decision on the tax hike by early October, but it is already seen by most in the government as crucial in fixing Japan’s burgeoning debt. There are critics of the tax hike plan as well, and they have called for delaying or watering down the tax hike, fearing that it will decimate what small momentum the initial growth from “Abenomics” has brought to the economy. “Japan’s basic stance is to raise the tax,” said Aso who, as finance minister, has consistently called for the need to raise the sales tax given Japan’s dire fiscal state. Unless Prime Minister Abe vetoes the increase, Japan’s sales tax will be raised to 8 percent in April from the current 5 percent. Stage two will be to increase the 8 percent to 10 percent in October 2015.
[via Yahoo News]
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