Cloudy economic conditions could hamper Japan's efforts to raise taxes, Japanese Economics Minister Heizo Takenaka said on Sunday. "It cannot be done on fiscal tightening theory alone. It must be done in line with economic conditions," Takenaka said on a television programme. Gross domestic product (GDP) growth virtually stalled in the July-September quarter, rising 0.1 percent in real price-adjusted terms from the previous quarter.
New calculation methods, to be adopted when revised data is released in early December, may show the economy had slightly contracted in the three months to September.
The government is set to phase out personal income tax cuts worth 3.3 trillion yen ($31.66 billion) over the next two years. The tax cuts were adopted in 1999 to stimulate the economy.
Takenaka said the financial system was stable, unlike 1997, when a financial crisis loomed before the consumption tax was raised, but there were signs of uncertainty over future economic conditions.
Personal consumption accounts for more than half of the 500-trillion-yen economy and was the sole factor boosting GDP in the period from July to September, he said.
The increase in the public's burden - in the form of reduced tax cuts as well as increases in pension payments from next April - should not exceed one percent of Japan's GDP, he said.
Japan's government debt burden is about 140 percent of GDP, among the highest in the developed world, because of various spending packages to boost its economy.