Investing.com - Financial Markets Worldwide
🥇 First rule of investing? Know when to save! Up to 55% off InvestingPro before BLACK FRIDAYCLAIM SALE

Hike On Sales Tax? Shinzo Abe Has Bigger Issues On His Hands

ByMingze Wu
Published 07/23/2013, 01:06 AM
Updated 07/09/2023, 06:31 AM
ICON
-

If Japan’s Prime Minister Shinzo Abe, riding high on Sunday’s election victory for his ruling coalition, is serious about transforming the economy, it’s crucial that he pushes ahead with plans to raise a controversial consumption tax, analysts say.

The tax on goods and services, under the current law, is due to rise to 8 percent next April from 5 percent and to 10 percent in 2015, although there has been a heated debated within the government as to whether this should happen.

On the one hand a consumption tax is seen as a key measure to improving Japan’s fiscal health. Japan, the world’s third biggest economy, has a debt pile that is the highest among industrialized nations and its debt-to-GDP ratio is expected to top 245 percent this year.

But on the other hand, the tax could hurt consumer spending and stifle the economic recovery Abe is trying to engineer through a mix of fiscal spending and aggressive monetary stimulus.

“The decision on whether to raise the sales tax as early as next April is a finely balanced one with significant implications – both for the economy and for the perceived credibility of Abenomics,” said Nicholas Spiro, managing director at Spiro Sovereign Strategy.

“The last consumption tax increase in Japan ended in disaster, helping trigger a recession. Yet if Mr Abe puts it off, doubts about the fiscal credibility of his project will grow, potentially spooking the bond market,” he added.

Original post

Latest comments

Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.