TOKYO The Bank of Japan will consider further monetary easing if Prime Minister Shinzo Abe decides to raise the sales tax as planned to 8 percent from 5 percent in April, the Asahi newspaper reported on Wednesday.
BOJ Governor Haruhiko Kuroda suggested to a government panel that the central bank could ease policy if the economic outlook worsened at the time of next year's scheduled tax hike, the Asahi said, citing sources who were on the panel.
The government panel, which met last week, recommended proceeding with the sales tax hike but proposed some form of stimulus to cushion the blow.
Some of Abe's advisers and members of his ruling Liberal Democratic Party have worried that the sales tax hike will hit consumer spending.
Abe, who has made ending 15 years of deflation and revitalizing the economy among his top priorities, will decide in early October whether to change to the sales tax hike plan, which is part of a multi-party agreement to reform the welfare system.
Kuroda said last month that he does not expect the economy to slow if the sales tax is raised as scheduled and that a higher sales tax will not harm attempts to escape from deflation.
The government also plans a further sales tax hike, to 10 percent in October 2015, to pay for rising welfare costs. This was also endorsed by the government panel.
The BOJ starts a two-day policy meeting on Wednesday and is expected to keep policy on hold.
In April, the BOJ launched massive stimulus by pledging to nearly double the monetary base to 270 trillion yen by the end of next year to achieve its 2 percent inflation target.
(Additional reporting by Dominic Lau and Tomo Uetake; Editing by Paul Tait and Edwina Gibbs)