Abe Tax Hike and Lack of Stimulus Puts Bank of Japan in a Corner

A lack of detail from Japan’s Prime Minister Shinzo Abe about how the government will buffer the economy from a controversial rise in the sales tax adds pressure on the Bank of Japan to step up its monetary stimulus, analysts say.

Abe, who implemented radical economic policies – dubbed Abenomics – to revive the world’s third-biggest economy, said on Tuesday the country’s sales tax would rise to 8 percent from 5 next year as planned. The hike is seen as necessary to help ease Japan’s heavy debt load.

But an announcement on a stimulus package to offset the impact of the tax hike fell short of expectations. Instead of unveiling a cut in corporate tax, as anticipated by analysts, Abe said he had asked ruling parties to start a debate on corporate tax cuts and that a 5 trillion yen ($51 billion) stimulus package would be compiled in December.

via CNBC

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