TOKYO: Raising the sales tax is a “very obvious” choice for Japan to get its fiscal house in order, a senior IMF official said on Friday, shrugging off proposals by the country’s opposition parties to freeze a hike scheduled for 2019.
The International Monetary Fund logo is seen during the IMF/World Bank spring meetings in Washington, U.S., April 21, 2017. REUTERS/Yuri Gripas.
Odd Per Brekk, the International Monetary Fund’s mission chief for Japan, also said he saw no need for the Bank of Japan to begin communicating a future exit strategy from its ultra-easy monetary policy anytime soon.
“We think communication that focuses on maintaining monetary accommodation and achieving the 2 percent (inflation) target is the right approach and should remain the approach,” Brekk, who is also deputy director of the IMF’s Asia and Pacific Department, told Reuters in an interview. Japan’s sales tax hike has emerged as a key issue ahead of an Oct. 22 general election called by Prime Minister Shinzo Abe.
Abe has pledged to proceed with the move to raise the sales tax to 10 percent in 2019, from the current 8 percent, but said he wants to use the revenue more for education and childcare spending than paying down debt.
Opposition parties have called for freezing the hike, arguing it would harm Japan’s fragile economic recovery. Brekk said he had some concerns the hike could cool the economy, and called instead for a smaller, gradual hike in several stages.
But he stressed that raising the tax rate was essential and the best way to rein in Japan’s huge public debt, which, at twice the size of its economy, is the biggest among advanced nations.
