Wednesday, June 1, 2016

Consumer Tax hike is postponed in Japan

Shinzo Abe, Prime Minister of Japan, stated that consumer tax hike will be postponed till Oct 2019.

Japan’s retail sales stall as Abe mulls delay to tax hike

According to Abe, he shared the current fragile economic situation in the G7 summit. However, leaders in other countries seem not to support his opinion entirely.

The Guardian: Shinzo Abe postpones Japan tax rise after warning of economic slump

Taro Aso, Financial Minister, opposed Abe's idea. He told that dissolution of lower House is needed if Abe changed his decision when he promised the tax hike in the previous delaying. Some policy makers agreed with him.

But finally, Abe's idea was approved by most members of the cabinet. Basically, lawmakers dislike to decide the tax hike. Also, opposite parties suggested the delayed tax hike in advance. Dissolution of lower House is accompanied with the general election. It is risky for ruling Liberal Democratic Party to insist the tax increase.

I think Abe's decision of postponing tax hike will be accepted for a while. It is unsure tax hike will improve the fiscal situation in Japan. On the other hand, it is also quite doubtful that Abenomics is successful. The reason is clear: fiscal simulus and monetary easing have only temporal effects, and structual reform has not been performed. The way to lead continuous economic progress is in the mist.

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