BOJ Iwata: Japan can withstand tax hike pain

MIYAZAKI, Japan Wed Feb 5, 2014 9:22pm EST

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MIYAZAKI, Japan Feb 6 (Reuters) - Bank of Japan Deputy Governor Kikuo Iwata said on Thursday the economy can withstand the pain from a sales tax hike in April as exports and capital expenditure will gradually pick up and offset the drop in household spending.

He also said the central bank will not end its ultra-loose monetary policy unless its 2 percent inflation target is achieved in a stable manner.

"Japan is making steady progress toward meeting the BOJ's 2 percent price target. Under such circumstances, steadily proceeding with our current policy is what is most important," Iwata told business leaders in Miyazaki, southern Japan.

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stonewall_lee wrote:
Iwata underestimates the effects a 60% increase in the consumption will have on spending in general. Consumers will be hurt badly, and capital expenditures are also subject to the increased taxation. Many companies are making capital expenditures now, ahead of the 60% tax increase. After the tax hike, all expenditures will drop. Purchasing power will be eroded and morale will dip. No Keynesian ‘stimulus’ can make up for decreased spending power of corporations and consumers.

Feb 06, 2014 1:22am EST  --  Report as abuse
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