Finance Minister Taro Aso Photo: REUTERS file
politics

Aso plays down need for stimulus after tax hike

12 Comments
By Tetsushi Kajimoto

Japan's finance minister on Friday dismissed the need to boost fiscal stimulus to counter the impact of a national sales tax hike, despite expectations the government and the Bank of Japan may act to reduce pressure on the world's third largest economy.

The government rolled out a twice-delayed rise in the sales tax to 10% from 8% on Tuesday, a move that is seen as critical for fixing the country's tattered finances. But there are fears the higher tax could hurt consumer spending and tip the economy into recession.

This has led to speculation that Tokyo will step up fiscal spending although it has already taken measures to mitigate the pain on consumption, mindful of the severe economic downturn that followed the last increase in the sales tax in 2014.

Speaking to reporters after a cabinet meeting, however, Finance Minister Taro Aso said he saw no big confusion among retailers and shoppers over the tax hike as corporate earnings and household incomes were solid.

While U.S.-China trade frictions warranted attention, "we are not facing such a situation that stimulus should be taken immediately," Aso said.

Market expectations of further BOJ easing also grew after Governor Haruhiko Kuroda pledged in July to act preemptively. Signs have also emerged recently that its nine-member board may be tilting towards further easing as global pressures intensify.

"We expect the Bank of Japan to maintain its ultra-loose monetary policy settings, and we would not rule out further easing measures if growth falters below their expectations," Fitch Ratings said in a statement issued on Friday.

"We would also not rule out additional fiscal stimulus, possibly from a supplementary budget early next year, to counter cyclical headwinds."

Earlier on Friday, Economy Minister Yasutoshi Nishimura told reporters it was necessary to carefully watch consumption trends as there are worries the hike may weigh on consumer sentiment.

Fitch affirmed Japan's 'A'/Stable rating in July, taking the tax hike and the offsetting measures into account. The tax hike will help reduce Japan's gross general government debt-to-GDP ratio to just over 220% by 2028, from 232% at present - still the highest among Fitch-rated sovereigns.

The ratings agency expects Japan's GDP growth to slow after a strong first half of this year, as external demand weakens due to slowing global growth and the U.S.-China trade war.

Growth momentum likely faltered in the July-September quarter, as highlighted by weakening consumer confidence and slowing purchases of durable goods, it said, adding that it estimates full-year 2019 growth at 0.8%, slowing to 0.3% next year.

© (c) Copyright Thomson Reuters 2019.

©2019 GPlusMedia Inc.

12 Comments
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We’re going down, down , down...

7 ( +7 / -0 )

Aso has no idea of how the Japanese worker struggles to make a living and pay bills to keep the household going

10 ( +10 / -0 )

If they want to increase consumer spending, just raise the minimum wage- is that so hard to understand since something like 60% of workers are on low wages and contract work.

6 ( +7 / -1 )

Agree with vic. M.

Been here 20 years and never seen any wage increase other than that for part time staff in convenience stores! Oh, and the fat cats of course!

5 ( +5 / -0 )

Finance Minister Taro Aso said he saw no big confusion among retailers and shoppers over the tax hike as corporate earnings and household incomes were solid.

Yes, you saw no confusion because as usual you never went out to get a feel and are completely out of touch.

How a dinosaur like you continues ti manage an important ministry like finance beggars belief.

It is because of people like you that the economy has continued to tank for the past 30years.

As usual you will attribute your incompetence on outside foreign outcome.

The most disturbing thing is that the media is so scared of holding people like Aso to task.

8 ( +8 / -0 )

It's the lack of money that is preventing stimulus, not the lack of need for it.

The Japanese government is rapidly approaching the debt default level with its soaring national debt, and can't afford to spend money on stimulus. It's simple as that.

5 ( +5 / -0 )

Stimulus spending is coming no matter what this blue blood charlatan says.....LDP electoral support depends on it. That the economy will head for a temporary downturn is not even up for discussion, especially with Olymics pork barrel spending coming to an end.

2 ( +2 / -0 )

The Japanese government is rapidly approaching the debt default level with its soaring national debt, and can't afford to spend money on stimulus. It's simple as that.

You are wrong about that. Japan's debt is in yen, so all they have to do is print more of it. And that's what they will do (as will the US at some point). This is the tried and true method, eventually ending in runaway inflation. But at least the debt gets paid!

-6 ( +0 / -6 )

Finance Minister Taro Aso said he saw no big confusion among retailers and shoppers over the tax hike as corporate earnings and household incomes were solid.

LOL, I hope the minister know the difference between private income and government income.

Perpetual government budget deficit can't go on forever, so stop propping up the wealthy with your government bonds paying extraordinary coupons when in actual fact interest rate is negative.

The country is paying an income to wealthy bankers, when it's the bankers that shoukd be paying government to look after their money. Go talk to your reserve bank about it.

-1 ( +0 / -1 )

What are these geriatric dinosaurs still doing in parliament? Retirement at 70 should be mandatory.

1 ( +1 / -0 )

Silver Spooners like Aso won't be too hurt personally by a 2% consumption tax increase, so of course, he doesn't see any need for urgent action.

3 ( +3 / -0 )

The Japanese government is rapidly approaching the debt default level with its soaring national debt, and can't afford to spend money on stimulus. It's simple as that.

But there is money to buy corn that it doesn't need to giveaway to Africa just to please master Donnie

3 ( +3 / -0 )

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