Abe Eyeing Economic Measures for Consumption Tax Hike

May 29, 2018

Tokyo- The Japanese government will implement large-scale economic measures to smooth the way for a consumption tax hike from 8 pct to 10 pct in October 2019, Prime Minister Shinzo Abe said Monday.

The government "will take temporary special measures under the initial budgets for fiscal 2019 and 2020," Abe told a meeting of his Council on Economic and Fiscal Policy.

The plan for special economic measure will be included in annual economic and fiscal policy guidelines due out next month.

Abe instructed economic and fiscal policy minister Toshimitsu Motegi to consider specific economic steps.

The move comes amid concerns about a possible drop in consumption following a surge in demand before the tax increase.

The government said Monday it aims to level out changes in demand before and after the tax hike.

Experts from the private sector proposed at the meeting that the goal of achieving a primary budget surplus should be postponed from fiscal 2020 to fiscal 2025.

They said the government may be able to achieve a primary budget surplus as early as fiscal 2024 under optimistic scenarios of economic growth and continued fiscal reform.

But they said that in view of a possible recession, a certain degree of fiscal flexibility needs to be retained.

Their proposal calls for the government to set three interim goals for fiscal 2021 to assess its progress in efforts to achieve a primary budget surplus.

The three targets are to reduce the ratio of a primary budget deficit to some 1.5 pct of the country's gross domestic product from the current 2.9 pct, curb the budget deficit to within 3 pct of GDP and cut the amount of outstanding government debts to below 185 pct of GDP. Jiji Press