Japan government panel says to raise sales tax in 2017

TOKYO (Reuters) – Japan’s government will lay the economic groundwork to implement a planned tax increase in 2017, a top-level advisory panel is set to recommend, bolstering the view that Prime Minister Shinzo Abe is stressing growth over austerity as he tries to balance the budget.

The increase in the national sales tax to 10 per cent from 8 per cent “will be implemented in April 2017 while preparing the economic environment” for the move, says a draft of the panel’s report, seen by Reuters on Tuesday.

Abe last year delayed the tax hike, the second since he took office in December 2012, when the economy sank into recession after the first increase. He has committed to raising the tax again to help trim a government debt burden that is the industrial world’s heaviest, at more than twice GDP.

But in recent months the premier has increasingly stressed measures to boost growth rather than painful spending cuts to whittle down the debt as a percentage of GDP.

Abe’s government is struggling to meet its ambitious target of achieving a budget surplus, excluding debt servicing costs and income from bond sales, by the fiscal year ending in March 2021.

In order to prepare for the tax hike, the government will “respond flexibly, as appropriate,” according to the draft of an annual blueprint of fiscal and economic policy proposals.

It is to be presented on Wednesday to the Council on Economic and Fiscal Policy and debated within the government ministries and ruling parties before a final version is adopted by the Cabinet around the end of the month.