"Abe will probably give the economy more shots in the arm and turn a blind eye to fiscal discipline until the elections"
- Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co.
The Japanese government is widely expected to increase income taxes that should add to the government's revenue, but is also likely to anger citizens opposed to the nation's austerity measures. The Liberal Democratic Party and New Komeito are close to agreeing on raising the maximum income tax rate to 45%, up from existing 40%. At the same time, the top inheritance tax rate will be raise to 55% from 50%, while gift tax rates for assets will be lowered. The maximum rates for income and inheritance taxes are likely to be increased as early as 2015.
"Abe will probably give the economy more shots in the arm and turn a blind eye to fiscal discipline until the elections," said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo.
"Japan's economy has been very weak over the past couple of quarters and some stimulus is necessary to get the growth rate up at least over the near term," Thomas Byrne, senior vice president at Sovereign Risk Group, Moody's Investors Service, told CNBC Asia's "The Call."
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