Japan can ramp up fiscal stimulus if the hit to the economy from October’s sales tax hike proves bigger than expected, International Monetary Fund (IMF) Deputy Managing Director Mitsuhiro Furusawa said.
Furusawa also said there was no change to the IMF’s long-standing proposal for Japan to continue raising the tax rate in small increments over several years to 15%.
“If downside risks materialize and economic growth slows more than expected, additional fiscal support may be necessary, accompanied by continued easy monetary policy,” Furusawa, a former senior Japanese finance ministry official, told.
Prime Minister Shinzo Abe proceeded with a twice-delayed increase in the sales tax rate to 10% from 8% in October as part of efforts to rein in Japan’s huge public debt. Abe hopes the increased sales tax will support the fast-ageing population and rein in the industrial world’s heaviest public debt burden, more than twice the size of Japan’s $5 trillion economy.
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