Tokyo: Japanese Prime Minister Shinzo Abe said Tuesday that he has no plans to nix a consumption tax hike planned for next year, denying speculation that it will be postponed amid suggestions that Japan's economy won't be able to handle it.
Speaking at a news conference marking parliament's formal approval of the government's 96.7 trillion yen ($850 billion) fiscal 2016 budget, Abe said the tax hike is needed to maintain Japan's welfare system and to secure confidence from markets and the international community.
"There is no change to the tax hike plan next year unless there are situations like the Lehman shock or a massive earthquake," Abe said.
The tax was due to rise to 10 percent from 8 percent in October, but the hike was deferred until April 2017. Many in Japan are betting that with national elections looming this summer, Abe will be inclined to postpone the increase.
Abe has been meeting with renowned economists from in and outside Japan, including Nobel laureates Paul Krugman and Joseph Stiglitz, who both suggested that he should delay the hike. Abe, by meeting the experts, is seen as laying the ground for another postponement.
Japan's economy initially expanded under an "Abenomics" policy mix of monetary easing and fiscal stimulus, but the growth has remained below forecasts due to China's slowdown and lackluster spending by households and businesses. The economy is forecast to shrink in the current quarter following a contraction at an annual rate of 0.3 percent in October-December.
Updated Date: Mar 29, 2016 19:51 PM