Abe Adviser Hamada Doubts Japan Economy Showing Real Improvement

Koichi Hamada, an adviser to Prime Minister Shinzo Abe, said it was too early to know whether Japan’s economy has turned the corner under the economic policies known as Abenomics.

“Various economic indicators, including investment data, are picking up, but I’m not sure if they show a meaningful improvement,” Hamada said at an event today at Bloomberg’s Tokyo office.

Hamada reiterated that a planned increase of the sales tax should be postponed or made in smaller steps, saying growth needs another year or so to reach its potential. Abe will decide whether to proceed with the move to rein in the world’s largest debt burden in early October after examining business confidence and revised growth data.

The former Yale University professor said it’s questionable whether Japan needs to go ahead with raising the levy on consumers given the possibility that it could derail Abe’s economic agenda.

Capital spending was unchanged from a year earlier in the second quarter after a 3.9 percent drop in the first three months of the year, a finance ministry report showed this week. Business investment by manufacturers fell 9.1 percent in the April-June period, a third quarter of decline.

Gross domestic product preliminary data showed an annualized 2.6 percent expansion in the second quarter from the prior period, a third straight quarterly gain. The expansion in the world’s third-largest economy has been supported by the Bank of Japan’s unprecedented easing, and a yen that has weakened 13 percent against the dollar this year.

First Arrow

Hamada said today that monetary policy, the first of Abe’s so-called three economic arrows, is working well.

He was one of 60 people including business leaders, economists and consumer advocates who sat on panels last week to discuss the merits of proceeding with the plan to raise the sales tax to 8 percent in April from the current 5 percent, with a later bump to 10 percent in October 2015. Most members advised the government to back the move even as they urged stimulus to cushion the economic blow.

Postponing the tax increase would have a large and negative impact on Japan’s financial markets, 22 of 32 economists said in a Bloomberg News survey.

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