Japan vice economy minister: More caution needed on next tax hike

By Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s government needs to be more cautious about a coming decision on raising the national sales tax than it was on the previous hike as the economy reaches a “make-or-break point,” a senior government official said on Wednesday.

Vice Economy Minister Yasutoshi Nishimura told Reuters he was concerned that the drag on consumption from the April 1 tax hike is proving prolonged, saying the government stands ready to roll out fresh fiscal stimulus to support the economy.

Prime Minister Shinzo Abe is to decide around the end of the year whether to proceed with a plan to raise the tax to 10 percent next year after raising it to 8 percent from 5 percent in a bid to curb Japan’s runaway government debt.

Nishimura said he hopes that the Bank of Japan would decide on further monetary easing as appropriate, adding that it is too early to debate exit from its massive monetary stimulus given that deflation has not been conquered yet.

“Our view on the economy’s trend remains unchanged that it is making steady progress toward a 2 percent inflation target, in other words beating deflation,” Nishimura told Reuters in an interview. “I’m very concerned about private consumption’s trend in July and August … It seems that the pullback in demand after the sales tax hike is being prolonged.”

(Additional reporting by Yuko Yoshikawa and Linda Sieg; Editing by William Mallard and Chris Gallagher)

Japan vice economy minister: More caution needed on next tax hike