Abenomics describes the plans of Japanese Prime Minister Shinzo Abe to revive growth in the world’s third largest economy, which is struggling to find traction under the impact of a strong yen and stubborn deflation.
Japan PM vows to pursue growth, fiscal plan at G20, no word on sales tax
Reuters in St Petersburg
Japanese Prime Minister Shinzo Abe told the Group of 20 summit that Tokyo aims to achieve both economic growth and fiscal reforms with his pro-growth policy agenda, but steered clear of a pending decision on a planned sales tax hike.
Speaking at the first session of the summit, Abe said Japan will pursue its aim of halving the budget deficit - excluding new bond sales and debt-servicing - by the fiscal year to March 2016 and achieving a surplus by March 2021.
But he made no mention of the planned doubling of the sales tax over the next two years, as stipulated by a law passed last year, which has become a focus of the fiscal debate in Japan.
“It is particularly important for Japan to achieve both economic growth and fiscal consolidation as our country’s fiscal situation is severer than other countries,” Abe was quoted by a Japanese official as saying.
Japan’s public debt is twice the size of its US$5 trillion economy, which is the worst ratio among industrialised countries.
Abe is struggling to balance the need to rein in the country’s snowballing debt and stimulating growth in the world’s third-biggest economy with his “Abenomics” policy mix of bold monetary easing, fiscal stimulus and pro-growth reform plans.
Japan, as well as other countries, presents its mid-term fiscal plan at the G20 summit, but failure to raise the tax levy as planned could jeopardise Tokyo’s fiscal consolidation scheme.
At the G20 summit session, other countries did not take issue with Abe’s explanation, while Russian President Vladimir Putin and IMF chief Christine Lagarde described ‘Abenomics’ as a new movement, the official added.
After dinner talks with G20 finance ministers, Japanese Finance Minister Taro Aso said a decision would be taken on the sales tax in early October, taking into account prevailing economic conditions.
Abe has repeatedly said he will make a decision this autumn on whether to implement the tax hike, while examining economic indicators to see if the economy would withstand its impact. The decision is expected to be made by early October.
If there’s no change in the plan, Japan’s sales tax will be raised to 8 per cent from 5 per cent in April and to 10 per cent in October 2015, a move seen as crucial in funding bulging welfare costs and fixing Japan’s dire fiscal situation.
Abe will cut short his summit attendance, leaving for Buenos Aires later Thursday, where the International Olympic Committee (IOC) will vote on Saturday to decide whether Istanbul, Madrid or Tokyo will host the 2020 Summer Games.