August 12, 2013 / 4:35 AM / 6 years ago

Japan PM adviser Hamada: no need to hurry with sales tax hikes

Koichi Hamada, professor emeritus of economics at Yale University and an economic adviser to Japan's Prime Minister Shinzo Abe, poses for photos after an interview with Reuters in Tokyo March 15, 2013. REUTERS/Toru Hanai

TOKYO (Reuters) - Japan’s government has no need to hurry to raise the sales tax and could consider delaying its scheduled increase by one year, an adviser to Prime Minister Shinzo Abe said after data showed the economy expanded less than expected in the second quarter.

“Raising the sales tax would not lead to an increase in revenue,” Koichi Hamada, who is also professor emeritus at Yale University, told Reuters.

“There is no need to raise the sales tax in a hurry. One idea is to delay everything by one year.”

He added: “I feel that raising the sales tax as scheduled might hurt the economy.”

Japan is due to raise its 5 percent sales tax rate to 8 percent next April and then to 10 percent in October 2015, as part of an effort to curb its debt, which is about double the size of its GDP.

But Monday’s GDP data may weaken the case for the tax hike. Sources have said Abe is worried the tax increase may dampen spending and delay Japan’s escape from 15 years of deflation.

Government officials have said the preliminary GDP data and revised figures due on September 9 would be key factors in the tax debate, with a final decision possible by early October.

Reporting by Stanley White and Sumio Ito; Editing by Edmund Klamann

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