Exclusive: Japan firms overwhelmingly want Abe to delay tax hike - Reuters poll

Thu Nov 13, 2014 4:30am EST
 
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By Tetsushi Kajimoto

TOKYO (Reuters) - Japanese companies overwhelmingly want Prime Minister Shinzo Abe to delay or scrap a planned tax increase, a Reuters poll shows, highlighting concerns that it could derail a fragile economic recovery.

As expectations grow that Abe will soon announce he is putting off the unpopular measure, the Reuters Corporate Survey found that nearly three in four big companies think the economy is too weak to weather the increase as scheduled in October 2015.

The government raised the national sales tax to 8 percent from 5 percent in April, the first of a two-stage plan that would raise it to 10 percent next October in a bid to rein in massive public debt.

The April hike pushed Japan into its worst decline since the global financial crisis in the second quarter. Abe has said he will look at third quarter GDP, due out Monday, before deciding whether to proceed with the planned October 2015 tax increase.

Some Japanese media say Abe will postpone the hike and call a general election in an effort to lock in his grip on power. The economy likely grew at an annualized 2.1 percent rate in the third quarter, a relatively feeble rebound the from the 7.1 percent April-June plunge, a Reuters poll of economists showed last week.

"It's highly risky to force through a tax hike in a situation where consumption has not recovered as expected," said a manufacturing executive in the Reuters survey. "It's desirable to delay it."

The maker of Subaru cars warned that the tax hike would harm a faltering economy.

"Everyone is saying things, including cars, are not selling. I am very worried about the sales tax hike next October," Fuji Heavy Industries Ltd (7270.T: Quote) CEO Yasuyuki Yoshinaga told Reuters in an interview this week.   Continued...

 
Men are reflected in a glass railing as they walk at the Shiodome business district in Tokyo November 12, 2014. REUTERS/Thomas Peter