Japanese companies overwhelmingly want Prime Minister Shinzo Abe to delay or scrap a planned tax increase, a Reuters poll shows, highlighting concerns that it could derail a fragile economic recovery.
As expectations grow that Abe will soon announce he is putting off the unpopular measure, the Reuters Corporate Survey found that nearly three in four big companies think the economy is too weak to weather the increase scheduled in October next year.
The government raised the national sales tax to 8 percent from 5 percent in April and planned to bring it to 10 percent in October in a bid to rein in huge public debt.
Photo: EPA
The April hike pushed Japan into its worst decline since the global financial crisis in the second quarter. Abe has said he will look at third-quarter GDP, due out on Monday, before deciding whether to proceed with the planned tax increase next year.
“It’s highly risky to force through a tax hike in a situation where consumption has not recovered as expected,” a manufacturing executive said in the Reuters survey. “It’s desirable to delay it.”
The Reuters poll of 486 large manufacturers and non-manufacturers, conducted from Oct. 27 to Nov. 10 by Nikkei Research, does not fully reflect the Bank of Japan’s Oct. 31 monetary easing, which stunned markets, pushing up Tokyo shares and weakening the yen.
Of the 250 firms answering questions on the sales tax, 72 percent said the world’s third-biggest economy cannot cope with the planned tax hike next year, while 28 percent said it can.
One-third of companies said they want the government to put off the tax hike by up to a year, a quarter called for a delay by a year-and-a-half or more, and 10 percent want the idea scrapped.
“The priority should be put on ending deflation,” an executive at a service company said.
Companies participate in the monthly survey anonymously.
“A tax hike must wait until prices and wages pick up to an extent that people can actually feel inflation, otherwise the economy could falter,” the executive said.
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