TOKYO (Reuters) - A prominent adviser to Prime Minister Shinzo Abe warned on Monday that Japan’s growth remains too weak to raise the national sales tax, highlighting the difficulty of the tax decision facing Abe in coming weeks.
Japan’s April-June gross domestic growth at an annualized pace of 2.6 percent was “lower than expected”, Etsuro Honda told Reuters shortly after the data was published. The market consensus had been for 3.6 percent growth.
“We really can’t say that the conditions have been achieved to raise the sales tax as planned,” said Honda, a Shizuoka University professor and one of two outspoken advisers to Abe urging caution about the planned doubling of the tax to 10 percent.
Abe’s government has repeatedly flagged second-quarter gross domestic product as a key factor in deciding whether to proceed next April with the first stage of the tax increase, which is meant as an initial step in tackling Japan’s massive government debt. Abe is to decide by early October.
Abe’s coalition parties and the previous government agreed last year to raise the sales tax to 8 percent from 5 percent in April next year and to 10 percent in 2015. But the tax-hike law requires the government to certify that the economy is strong enough to weather the pain.
Reporting by Yoshifumi Takemoto; Writing by William Mallard; Editing by Edmund Klamann