While aiming to raise the sales tax in October, the Japanese are willing to change their policy if the economic conditions get worse according to sources.
The document draft obtained by Reuters contains guidelines that should be approved by the Japanese prime minister Shinzo Abe at the end of this month.
“We need to closely watch external developments including trade issues, with exports and output showing weakness despite a gradual recovery seen in Japan’s economy,” says the document, adding that several parts of the world are experiencing a slowing down economy, like China or some European countries.
The report also says that the government would make all policy tools available to help the economy to sustain its recovery. The country grew up 2.2% in the first quarter of this year, more than the 1.8% expected by the experts.
Japan is now facing a disjunctive between having a responsible fiscal policy and stimulating a slowing economy. On one hand, Japanese society is aging fast, which demands the land of the rising sun to raise taxes and putting their finances on order, on the other hand, the effects of a tax rise on consumption may hinder Japanese economic growth, which is already being affected by the global economic situation.
Notwithstanding Japan’s economic progress, president Donald Trump’s threats to impose tariffs on their goods if they don’t reach an agreement that would help to close the trade gap between both countries. Despite visiting the country recently, both governments are not expected to meet before the next house of Councilors election.
The report also adds that the Japanese government expects the bank of Japan to adopt an easing monetary policy that would help them to reach its 2% inflation target.
Japan is expected to raise its sale tax from 8 to 9 percent in October.