LONDON (REUTERS) - Japan's consumer spending has not slowed as much as feared after a consumption tax hike in April, but such a risk warranted caution, Prime Minister Shinzo Abe said on Thursday.
Speaking to business leaders in London, Mr Abe also said wages and employment must improve visibly to overcome deflation.
"While of course we still need to exercise caution regarding the risk of Japan's increased consumption tax rate dampening consumption, people are taking an optimistic view that consumption has not been diminished to the extent we had feared," he said.
Mr Abe's 10-day visit to Europe will also take in Portugal, Spain, France and Brussels, institutions such as NATO and the Organisation for Economic Cooperation and Development (OECD), and meetings with European business leaders.
Mr Abe, who has begun to reverse years of sub-par growth with expansionary fiscal and monetary policies, has also said his measures are leading the economy out of deflation.