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Japan to Front-Load Spending in FY14 Budget as Tax-Bump Looms

Japanese Prime Minister Shinzo Abe
Japanese Prime Minister Shinzo Abe. Photographer: Tomohiro Ohsumi/Bloomberg

Japan will front-load spending in its budget for the year from April 1, as Prime Minister Shinzo Abe seeks to cushion the world’s third-bigggest economy from the first sales-tax increase in 17 years.

The government will aim to complete 40 percent of projects earmarked in the budget by the end of June and 60 percent by the end of September, Finance Minister Taro Aso said in Tokyo today.

The 3 percentage-point rise in the sales levy is forecast to trigger a one-quarter contraction, increasing the headwinds to Abe’s effort to sustain recovery. With consumers unexpectedly cutting back on spending in February, fiscal support early in the year could help the economy weather the blow as emerging inflation cuts into households’ purchasing power.

Household spending fell for the first time in six months and retail sales growth slowed, while a measure of inflation that strips out prices of energy and fresh food increased the most since 1998, according to government data released today.

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