THE RADICAL monetary policies of the Bank of Japan may be pushed even further if Prime Minister Shinzo Abe’s tax hike impacts demand.
The Bank of Japan confirmed yesterday that it would hold interest rates at their current low of 0.1 per cent, with the governor of the Bank insisting that he was open to further easing if the government’s incoming tax rise had a negative effect on the economy.
The controversial move is supported by Bank governor Haruhiko Kuroda, who said that if the change in rates had any impact on attempts to raise inflation to two per cent, the Bank “will take necessary measures in response”.
Japan’s sales tax is currently five per cent, but is set to be increased to eight per cent in April next year, and 10 per cent in 2015.
The country was one of the three advanced economies lauded for their encouraging growth rates by the Organisation for Economic Co-operation and Development (OECD) earlier this week.
The OECD expects Japanese GDP to expand by 1.6 per cent in 2013, ahead of the UK.