Japan should raise sales taxes again next year despite wobbles in the economy caused by the first rise, and the central bank should cushion the blow with more easy money, the Organisation for Economic Co-operation and Development (OECD) said yesterday.
The Bank of Japan must do more “beyond 2015” to support the world’s third-largest economy, OECD deputy secretary-general Rintaro Tamaki said.
“Japan’s public debt has surged in the past few years, in a way that makes it comparable to Greece’s,” Tamaki told reporters in Tokyo.
Photo: AFP
“Japan should not only implement the planned sales tax hike in October 2015, but also show its people what will come next, explaining the schedule and direction of further tax hikes” to allay fears about the sustainability of the country’s finances, he said.
Japanese Prime Minister Shinzo Abe raised sales taxes from 5 percent to 8 percent in April as part of structural reform efforts, and has laid out plans for a second increase to 10 percent for this time next year.
However, government figures show the economy contracted 1.8 percent quarter-on-quarter in the three months to June — or 7.1 percent year-on-year — its steepest quarterly drop since the 2011 quake and tsunami disaster.
The numbers were the latest in a series of worrying signs that the tax rise had hit the economy harder than expected.
Wages are still not showing the growth Abe had been looking for, while prices have risen, due in part to the tax rise and the plunging value of the yen, which has pushed up the cost of imported goods.
Abe has declared himself “neutral” on a further tax jump and said he would be watching the economic data carefully. Japanese Minister of State for Economic and Fiscal Policy Akira Amari told the Financial Times in an interview the rise to 10 percent was “necessary.”
Tamaki said Japan’s burgeoning debt held the “risk of rising interest rates due to the unpopularity of government bonds ... More crucially, the fact is that people’s worries over the state of the national finances, the core of a sovereign nation, have an enormous negative impact on economy and society.”
Japan’s gross public debt as a percentage of GDP is the worst among rich nations, at around 230 percent, due in no small part to snowballing medical and social security costs in the rapidly aging society.
The OECD supports the program of fiscal reforms dubbed “Abenomics,” Tamaki said, but he thinks that the Bank of Japan must come to the table.
“The OECD doesn’t recommend a huge fiscal stimulus to buffer shocks from a sales tax hike ... rather, it’s a question of monetary policy in 2015 and beyond, and I hope the Bank will show its commitment soon,” he said.
In April last year the Bank of Japan unleashed a multi-billion dollar asset-purchasing stimulus — similar to the US Federal Reserve’s quantitative easing — vowing no let-up in the battle against falling prices that have plagued the economy for decades.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to