Japanese Prime Minister Shinzo Abe proceeded with an April sales-tax increase and will implement a stimulus program as he tries to rein in the world's biggest debt burden without jeopardizing efforts to end deflation.
The levy will rise to 8 percent from 5 percent now, Abe, 59, said in Tokyo today, the first increase since 1997. Abe will unveil the size of a package of stimulus measures later today, the ruling party chief told reporters. Economists have projected a 5 trillion yen ($51 billion) plan that will include public works spending and tax breaks encouraging companies to boost capital spending and wages.With households already hit by a rising cost of living and declines in pay, proceeding with the higher levy enacted by the previous government poses the biggest risk yet to Abe's efforts to end two decades of Japanese stagnation. His next challenge in coming weeks is following through on pledges for domestic economic reforms that persuade companies to invest at home.
The economy will contract an annualized 4.5 percent in the three months after the sales tax is increased in April before returning to growth, according to the median calculation of economists surveyed by Bloomberg News. For the 2014 calendar year, the expansion is seen slowing to 1.6 percent from 1.9 percent this year, the median estimates show. Tailwinds for the world's third-largest economy heading toward the April increase in duties reduce the danger of Abe following in the footsteps of Prime Minister Ryutaro Hashimoto, who in 1997 oversaw a 2 percentage point boost in the levy. The move cost him his job as Japan sank into a recession with consumption swooning against a backdrop of weakening demand abroad due to the Asian financial crisis.
Source: NewsOnJapan
The economy will contract an annualized 4.5 percent in the three months after the sales tax is increased in April before returning to growth, according to the median calculation of economists surveyed by Bloomberg News. For the 2014 calendar year, the expansion is seen slowing to 1.6 percent from 1.9 percent this year, the median estimates show. Tailwinds for the world's third-largest economy heading toward the April increase in duties reduce the danger of Abe following in the footsteps of Prime Minister Ryutaro Hashimoto, who in 1997 oversaw a 2 percentage point boost in the levy. The move cost him his job as Japan sank into a recession with consumption swooning against a backdrop of weakening demand abroad due to the Asian financial crisis.
Source: NewsOnJapan
