Japanese Prime Minister Shinzo Abe is likely to delay a planned tax increase, a senior official of his party said on Friday, as cabinet ministers stressed the need to eventually fix the country's tattered finances. "I am convinced that within the next few days the message will come that there must be a delay," in raising the national sales tax, Masahiko Shibayama, head of an economic panel in the Liberal Democratic Party, told Reuters.
Japanese media say Abe will announce next week that he will delay the planned increase in the tax to 10 percent from 8 percent until April 2017 and call an election for next month as a referendum on his policies. Public broadcaster NHK said the announcements could come as soon as Tuesday. Top government officials, meanwhile, appeared eager to show that the government remained committed to reining in the heaviest public debt burden in the industrial world, at well over twice gross domestic product.
Economy Minister Akira Amari said that if Abe delays the tax hike, the government will do its utmost to meet its targets for balancing the budget over the coming years and maintain trust in Japanese government debt. But the premier cannot delay the tax increase indefinitely and must set a clear date for it, Amari told a regular news conference. Finance Minister Taro Aso also stressed the need for fiscal discipline, suggesting that some members of the government were trying to combat the impression that a delay in the sales tax increase marked the beginning of a looser fiscal policy.
The higher tax is part of a plan to help fund rising welfare costs and ease Japan's debt burden. But many politicians started to lose faith in this plan after a sales tax increase in April to 8 percent from 5 percent sparked the biggest economic slump since the 2009 global financial crisis. Amari stopped short of spelling out how the government could achieve its budget-balancing goals and said more stimulus may be needed for the economy in the short term.
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