Paul Krugman met Japanese Prime Minister Shinzo Abe and said he was concerned that a further increase in the nation’s sales tax planned for next year could hurt the economy, according to one of Abe’s aides.
Krugman, a 2008 Nobel laureate in economics, urged Abe to delay the bump scheduled for October 2015, without indicating how long he should postpone, said Etsuro Honda, an adviser to the Japanese leader who was present at the meeting.
Increasing the tax as scheduled could mean the failure of the prime minister’s revival program that’s been dubbed Abenomics, said Krugman, according to Honda. Abe didn’t give his own view on the tax during the meeting, said Honda.
The government has indicated a decision will be made by the end of this year on whether to proceed with an increase in the tax to 10 percent in October from the current 8 percent.
Expanded stimulus announced by the Bank of Japan on Oct. 31 has increased the chances of Abe going ahead with the tax hike, a survey by Bloomberg News shows.
A 3 percentage-point bump in the levy in April this year tipped the Japanese economy into the deepest contraction in more than five years.
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