Abe Coalition Ally Says Premier Shouldn't Back Down on Tax Rise

  • Measures in place to combat effect on consumption, Inoue says
  • Komeito party secretary-general Inoue speaks in interview

The secretary-general of Prime Minister Shinzo Abe’s junior coalition partner said the government should push ahead with a sales-tax increase next year, even as influential economists join the tide of public opinion for another postponement of a hike in the levy.

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"I think we should introduce it as planned," the Komeito party’s Yoshihisa Inoue said in an interview at his Tokyo offices Wednesday. "We are not in a situation where we have to give up on the sales tax increase."

Faced with the world’s highest debt burden, Abe’s government last increased the sales-tax to 8 percent in 2014, sparking a fall in consumer spending that triggered a recession. While Abe has said the planned April 2017 increase to 10 percent will go ahead unless there’s an event on the scale of the financial crisis, some of his advisers are calling for a delay due to the perilous state of the global economy.

Economic aide Etsuro Honda has also called for a postponement of the tax hike -- or even a freeze -- and Nobel-Prize winning economist Joseph Stiglitz told Abe on Wednesday that now is the wrong time to raise the tax. Japan’s economy, Asia’s second largest, contracted an annualized 1.1 percent in the fourth quarter, marking the second quarterly contraction of 2015.

The planned increase won’t have as much of an economic impact as the previous hike, because the government has taken steps to shield the most vulnerable, Inoue said.

"It’s different from when the tax was raised to 8 percent," he said, citing planned measures to protect those on low incomes. "We are very conscious of these issues."

Abe’s ruling Liberal Democratic Party and Komeito have spent months hammering out a plan to keep the levy on food at 8 percent when the overall rate rises to 10 percent next year. They have also agreed on cash handouts for elderly people with small pensions.

The original purpose of the sales tax increase was defined as "ensuring the stability and quality of social security," Inoue said. "Having stability in social security gives people peace of mind. For that reason, we should raise it."

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