"Kuroda's comments suggest he really wants an increase in the sales tax as scheduled. Fiscal reform is needed for Japan's economy."
- Yuichi Kodama, chief economist in Tokyo at Meiji Yasuda Life Insurance Co.
Bank of Japan Governor Haruhiko Kuroda supports Shinzo Abe's plan to raise the sales tax, as the world's third largest economy is strong enough to withstand a possible hike, backing the measure before commission meet next week to discuss the impact on economic growth. Kuroda suggests the economy will not lose speed if the sales tax is raised as planned, while according to latest estimates Abe is likely to abandon his plans to raise the sales tax up to 8% from current 5% in April, and instead increase it by just 1% a year, a move that possibly should soften the blow to consumption. BoJ Governor together with the nation's Finance Minister Taro Aso and other members of the government will attend the panel meeting and the fact that Abe's closest advisers Koichi Hamada and Etsuro Honda are among the panel members is adding to signs the decision will be taken.
Also Wednesday Kuroda pledged to adjust quantitative easing if downside risks from domestic shifts in policies or further slowdown in overseas economic increased. However, stable improvement in personal consumption and investment are reflecting the positive effect of Abenomics, suggesting BoJ's QE is heading in the right direction. Governor has once again reassured market participants in his readiness to achieve the 2% price stability target as planned even despite various risk factors.
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