On September 3, Prime Minister Shinzo Abe met
economic and fiscal
policy Akira Amari and Finance Minister
Taro Aso and was briefed on
the results of the government hearings
to study the possible negative
impact of a consumption tax hike from 5%
at present to 8% next April.
Abe said he would announce his decision
in early-October after
examining the results of the next Bank
of Japan “tankan” business
sentiment survey.
On September 5, BoJ board of directors held a
meeting and decided to
increase the monetary base by supplying
additional 60-70 trillion yen
annually, announcing that the economy is
in the phase of slow recovery.
BoJ president Kuroda announced his view
that the economic recovery
will continue for a while. Whereas
showing his view that the
scheduled-tax-hike won’t influence the nascent economic recovery,
Kuroda announced to conduct a further
relaxing monetary policy in case
the tax-hike hits the economy and the 2%
of price target becomes
infeasible. Kuroda’s remark may be considered as a request to the
Cabinet to conduct the tax-hike as
scheduled under the legislation
enacted last year as well as containment
toward the voices against the
tax-hike within the government. Yoshimi
Watanabe, president of Your
Party, criticized that BoJ should focus
on beating the chronic
deflation and should not interfere with
such a political matter as the
tax-hike.
The Cabinet Office released the revised growth
figures for the
April-June quarter on September 9, announcing
that the real GDP turned
to +0.9% (3.8% in annual rate) for the
first time in the latest 6
quarters. Seemingly the figure was
pushed by the business investment.
The nominal GDP, more closely linked to
household spending, was
released as +0.9% (3.8% in annual rate),
as well.
There are the supporting factors toward the
tax-hike such as the
result of the government hearings which
70% of the experts supported
it, the revised growth figures which
indicated the economy positively,
and that Tokyo won the right to host the
2020 Olympics. Meanwhile, yet,
there are the persistent voices against
the tax-hike as the economic
recovery is yet to be realized as actual
feeling. For example, the
labor statistics survey released in
July, while the total salary was
increased due to the bonus and other
additional incomes, the basic
salary has been decreased for the
straight 14 months. There are such
voices to request full countermeasures
to prevent economic
deterioration before deciding the tax-hike.
On September 10, Abe told Aso and Amari to
compile countermeasures to
prevent the tax-hike from collapsing the
economic recovery by
end-September. The ministers will likely
prepare measures like a
supplementary budget and tax-reduction
on investment. Abe will likely
announce the measures when he announces
his decision on the tax-hike
in “early October”. Abe will likely
announce his decision on either
October 1 or 2, after BoJ releases “the last economic indicator”.
The Cabinet and the ruling coalition agreed to
convene the
extraordinary Diet session on October
15, after Abe attends the summit
of the Asia-Pacific Economic Cooperation
forum from Oct. 7 to 8 in
Indonesia. The session will likely be
until early December. The
Cabinet will regard the session as arena
for realizing the growth
strategy, and will seek passages of the
legislations regarding the
industrial competitiveness, corporate
tax-reduction on investment,
Japanese version of NSC, and the power
industry reform.
While the term of LDP executive officers will
expire in
end-September, Abe announced on
September 4 announced he would
reappoint all the executives in the
current offices. Also, Abe
announced not to conduct a Cabinet
reshuffle as it’s been less than a
year since the ruling coalition came
back to power. Abe will cope with
the difficult challenges including the
tax-hike, TPP talks, growth
strategy and the initial budget FY2014
with the current core members
in the Cabinet and LDP.
Meanwhile, Abe will reshuffle about half of
the vice-ministers and
parliamentary secretaries (about 50
seats) for considering feelings of
the LDP faction leaders as well as the
middle and young lawmakers. Abe
will roughly arrange the nominations by
September 20. Still, as about
30% of the lawmakers are reelected for
more than 5 times, which is
normally considered as ripe for minister’s offices by the party’s
seniority rule, there are discontents
over Abe’s announcement not to
reshuffle the Cabinet members.
There is an increasing estimation that Abe
will decide to raise the
consumption tax rate. Further, the
government already started
discussing compilation of a
supplementary budget on a premise of the
tax-hike. At the same time, the special
advisors to Abe are opposed to
the scheduled tax hike.
Abe maintained the attitude not to announce
his decision until he
makes it even during the G20 summit
meeting in St. Petersburg, Russia.
Let’s see the prospect carefully.
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