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March 22, 2016 1:25 pm
Abe’s talks with Nobel laureates signal delay to sales tax rise
Robin Harding in Tokyo
Shinzo Abe has summoned two famous fans of fiscal stimulus to Tokyo as he lays the groundwork for delaying a rise in Japan’s consumption tax.
Paul Krugman and Joseph Stiglitz — both Nobel Prize-winners and both outspoken in support of aggressive stimulus — have met the Japanese prime minister at his official residence in recent days.
The meetings suggest Mr Abe is determined to put off a rise in consumption tax from 8 to 10 per cent scheduled for April 2017. Mr Abe is likely to use May’s G7 summit, which he will chair, as both platform and excuse for the delay.
According to political analysts in Tokyo, Mr Abe may then call a “double election” for both upper and lower houses of parliament, securing a fresh four-year electoral mandate.
“My judgment is they have already decided to postpone the consumption tax hike,” said Takao Toshikawa, editor of the political newsletter Tokyo Insideline.
He predicted Mr Abe would announce the delay at his G7 press conference, saying the gathered nations had agreed to do what they could to support the global economy and it was the wrong time for Japan to raise taxes.
Mr Stiglitz — a former chief economist of the World Bank and economic adviser to US president Bill Clinton — spoke at Mr Abe’s new international economy subcommittee last week. He said there were “limits” to the impact of monetary policy and urged Japan not to go ahead with the tax rise scheduled for next April.
A 2014 rise in consumption tax from 5 to 8 per cent drove Japan into recession and derailed the recovery set in train by Mr Abe’s stimulus policies.
On Tuesday it was Mr Krugman’s turn, with a meeting in Tokyo. Mr Abe met Mr Krugman shortly before a similar decision to delay consumption tax rises in autumn 2014.
Given that their leftwing politics is wildly at odds with Mr Abe’s conservatism, meeting both Mr Stiglitz and Mr Krugman sends a strong signal about where Japan’s prime minister is heading on consumption tax.
The committee has also met Dale Jorgenson of Harvard and Kazumasa Iwata, a dovish former deputy governor of the Bank of Japan and currently president of the Japan Centre for Economic Research.
Mr Abe’s economic programme has suffered a number of blows this year, with the economy shrinking in the fourth quarter of 2015, inflation hovering close to zero and a weak round of wage rises this spring
Abe’s talks with Nobel laureates signal delay to sales tax rise
Robin Harding in Tokyo
Shinzo Abe has summoned two famous fans of fiscal stimulus to Tokyo as he lays the groundwork for delaying a rise in Japan’s consumption tax.
Paul Krugman and Joseph Stiglitz — both Nobel Prize-winners and both outspoken in support of aggressive stimulus — have met the Japanese prime minister at his official residence in recent days.
The meetings suggest Mr Abe is determined to put off a rise in consumption tax from 8 to 10 per cent scheduled for April 2017. Mr Abe is likely to use May’s G7 summit, which he will chair, as both platform and excuse for the delay.
According to political analysts in Tokyo, Mr Abe may then call a “double election” for both upper and lower houses of parliament, securing a fresh four-year electoral mandate.
“My judgment is they have already decided to postpone the consumption tax hike,” said Takao Toshikawa, editor of the political newsletter Tokyo Insideline.
He predicted Mr Abe would announce the delay at his G7 press conference, saying the gathered nations had agreed to do what they could to support the global economy and it was the wrong time for Japan to raise taxes.
Mr Stiglitz — a former chief economist of the World Bank and economic adviser to US president Bill Clinton — spoke at Mr Abe’s new international economy subcommittee last week. He said there were “limits” to the impact of monetary policy and urged Japan not to go ahead with the tax rise scheduled for next April.
A 2014 rise in consumption tax from 5 to 8 per cent drove Japan into recession and derailed the recovery set in train by Mr Abe’s stimulus policies.
On Tuesday it was Mr Krugman’s turn, with a meeting in Tokyo. Mr Abe met Mr Krugman shortly before a similar decision to delay consumption tax rises in autumn 2014.
Given that their leftwing politics is wildly at odds with Mr Abe’s conservatism, meeting both Mr Stiglitz and Mr Krugman sends a strong signal about where Japan’s prime minister is heading on consumption tax.
The committee has also met Dale Jorgenson of Harvard and Kazumasa Iwata, a dovish former deputy governor of the Bank of Japan and currently president of the Japan Centre for Economic Research.
Mr Abe’s economic programme has suffered a number of blows this year, with the economy shrinking in the fourth quarter of 2015, inflation hovering close to zero and a weak round of wage rises this spring