Ex-BOJ Muto sees little risk of tax hike harming Japan recovery

TOKYO Tue Mar 4, 2014 11:35pm EST

Former Bank of Japan Deputy Governor Toshiro Muto poses after an interview with Reuters in Tokyo September 11, 2012 file photo. REUTERS/Yuriko Nakao

Former Bank of Japan Deputy Governor Toshiro Muto poses after an interview with Reuters in Tokyo September 11, 2012 file photo.

Credit: Reuters/Yuriko Nakao

TOKYO (Reuters) - Former top Japanese government and central bank official Toshiro Muto said on Wednesday he sees little risk that a coming tax increase will derail the economic recovery.

"Some people are concerned that the consumption tax could cause an economic downturn, but the risk of this is extremely small," Muto, a former deputy governor of the Bank of Japan and vice finance minister, said in a speech.

Speculation has grown recently that the BOJ might further ease policy, adding to its enormous asset purchases, to cushion the world's third-biggest economy from the blow of the April 1 sales tax hike.

BOJ Governor Haruhiko Kuroda eased policy last April, helping spur a sharp drop in the yen and a rise in stock prices which have helped Japan begin to emerge from 15 years of deflation and sputtering growth.

Although Muto was optimistic about the economy's ability to weather the tax increase, the chairman of private think tank the Daiwa Institute of Research said Kuroda's goal of 2 percent inflation is a "high hurdle."

(Reporting by Yoshifumi Takemoto; Writing by William Mallard; Editing by Dominic Lau)

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