May 18, 2016 / 3:16 AM / 4 years ago

Japan's growth strategy assumes tax hike on schedule

TOKYO (Reuters) - Japan’s annual economic growth strategy calls for measures to boost consumption on the assumption it will go ahead with a sales tax hike scheduled for next year, a draft presented at a government panel showed on Wednesday.

Japan's Prime Minister Shinzo Abe walks into his official residence in Tokyo, Japan, January 28, 2016. REUTERS/Yuya Shino

But the document may do little to temper speculation that the government will delay the tax increase scheduled for April 2017 amid lingering concern that consumer spending is struggling due to low wages for part-time workers.

Prime Minister Shinzo Abe told lawmakers he planned to go ahead with implementing the sales tax as scheduled, but he sidestepped questions on whether he could change his mind after hosting a Group of Seven summit.

“There is no change to intention to raise the sales tax unless there is a Lehman Brothers-type crisis or a natural disaster,” Abe said.

“But I need to consult experts’ opinions on whether we are in such a scenario.”

Japan’s economy expanded faster than expected in the first quarter, data showed on Wednesday, avoiding recession. But economists say patchy growth and worries about a global slowdown could eventually force the government to reverse its official position and avoid placing an extra burden on households.

Damage from an earthquake last month in the southern manufacturing hub of Kumamoto could also give the government reason to delay the tax hike before upper house elections in July, some economists say.

Abe’s government is set to finalize its growth strategy before the end of this month, which will feature previously announced policies such as an increase in the minimum wage, better pay for day care workers and steps to narrow the pay gap between regular and part-time employees.

The draft also called for a study on issuing shopping vouchers to households, a policy used by previous governments to try to prop up consumption.

In a separate policy statement to be finalised at the end of May, the government will unveil an additional set of growth plans, including an accelerated effort to forge free trade agreements, a draft obtained by Reuters showed.

The draft also said, rehashing similar growth plans in the past, the government would set up a council to promote the “Internet of Things”, in which industrial and consumer firms and software providers team up to offer smarter ways of doing things such as predicting mechanical problems before they arise.

The government is scheduled to raise the sales tax to 10 percent from 8 percent next April.

Japan will host a Group of Seven finance ministers and central bankers summit from Friday.

Additional reporting by Kiyoshi Takenaka; Editing by Chris Gallagher and Nick Macfie

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