A deadly series of large earthquakes in southern Japan might add to the case for Japanese Prime Minister Shinzo Abe to increase fiscal stimulus and postpone a planned increase in the nation’s sales tax.
Abe has said only an economic shock on the scale of the 2008 global financial crisis or the 2011 earthquake and tsunami in the country’s northeast would justify delaying the levy hike. Even before this latest disaster, advisers and influential economists had been calling on Abe to hold off raising the tax.
The earthquakes and scores of aftershocks, centered on Kumamoto Prefecture, have killed at least 42 people and left more than 1,000 injured. More than 110,000 people have been evacuated to shelters.
Abe yesterday hinted at a stimulus package. The damage to the area might also affect his thinking on whether to call a snap general election this summer to coincide with a poll for Japan’s upper house.
Former Bank of Japan executive director Hideo Hayakawa said in an interview yesterday that the disaster makes a double election more unlikely as the affected areas would still be in chaos.
“He might even decide to postpone the consumption tax hike without holding a double election,” Barclays PLC economists Kyohei Morita and Yuichiro Nagai wrote in an e-mail. “For now, the front-loading of the FY16 [fiscal year 2016] initial budget will likely be accelerated.”
“We will take all necessary measures,” Abe said yesterday in parliament in response to a question about the possibility of an extra budget.
The premier said he would consider speeding up the transfer of tax revenues to local governments and using surplus budget funds.
Political analyst Harumi Arima said the government would compile a large budget to aid the recovery in Kumamoto, as well as for “national resilience” measures to better prepare the quake-prone nation for disasters.
The Kumamoto region was already facing a downturn in business sentiment, including the tourist industry, according to central bank data.
Now, it is being suggested that insured losses from the earthquakes might exceed US$7 billion.
Toyota Motor Corp said its operating profit might be reduced by about ￥30 billion (US$276.94 million) for the current quarter, citing disruption to parts supplies and halted production lines at some of its factories.
Some of Abe’s confidants have been calling for stimulus and a postponement of the tax increase for months.
Japan’s ruling Liberal Democratic Party lawmaker Kozo Yamamoto — one of the prime minister’s group of pro-reflation advisers — last week called for a ￥10 trillion fiscal package.
Nomura Holdings Inc analysts on Sunday wrote that while the scale of the damage is still unclear, the disaster is not on the same scale as the 2011 disaster. Even so, the brokerage pointed to damage to supply chains in industries from automobiles to electronics.
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