A top adviser to Japanese PM Abe opened the door to delaying the consumption tax hike that’s planned for October 2015, in comments to Nikkei.
The comments are from Koichi Hamada who said the economy must been in good shape and it’s difficult to judge now if conditions are right. He said the sales tax hike shouldn’t happen if the economy continues to shrink and that the corporate tax rate should be cut to 25% from 35% over 3-4 years.
Japan has very few options to stimulate its economy aside from currency devaluation. If data continues to deteriorate we’re entering a period where more QE or other dramatic measures could be put on the table.
Failing to implement the planned tax hike is a dangerous move but the government could escape a debt downgrade if it’s simply delayed. Although the Oct 2015 date is still a long ways away, the government will likely have to make a decision by March to keep planning on track.
