A government panel has just been convened on Monday to start a seven-day discussion on whether the sales tax should be increased next April, as industry experts and businessmen alike are concerned that it could sap the momentum out of Japanese Prime Minister Shinzo Abe’s efforts to end Japan’s chronic deflation. Abe is set to hear out feedback from a panel of 60 people – which includes university professors, business leaders, and heads of non-profit organizations – and will make the decision on whether the first phase of the tax hike, from 5% to 8%, should proceed next April.
Abe is expected to make his decision before leaving the country to attend the Asia-Pacific Economic Cooperation forum summit on Oct. 7. His decision will be based on the gross domestic product figures for April-June, including the aforementioned panel’s opinions. “The government believes that economic revitalization would expedite the rehabilitation of fiscal health,” Finance Minister Taro Aso said at the beginning of the meeting. Aso is one of those who say that the tax hike should proceed as planned, but other industry experts are divided on the issue. The panel is also partly led by Economy Minister Akira Amari and Bank of Japan Governor Haruhiko Kuroda, who both have spoken in favor of the tax increase. Amari, however, said that the group is starting the discussion with no preconceived views. “We will make a brief summary of the overall debates with experts, without any bias,” Amari told reporters last week. Amari is set to report on the discussions to Abe next week.
Supporters of the tax hike say that it is vital for repairing Japan’s finances. Opponents of the hike, which include Koichi Hamada and Etsuro Honda – both close economic advisers to Abe – say increasing the tax would kill the positive momentum of an economy that has just started to recover. Hamada and Honda are also part of the 60-member group. Polls by major Japanese media organizations also suggest that there is difficulty in judging overall opinions on the issue. The Asahi Shimbun showed 43% in favor of the current hike plan, but the positive opinion in a Nikkei survey was only 17%.
[via Wall Street Journal]