Japanese Finance Minister Taro Aso confirmed that he told his G7 finance leaders that Japan will increase sales tax in 2017 during their meeting in Sendai, northeast Japan.

During the meeting with the Group of Seven, Finance Minister Aso said that raising the sales tax is a very important factor in maintaining trust in Japan’s finances. He told U.S. Treasury Jack Lew that Japan will eventually push its plan to raise the tax next year.

However , the finance minister remained skeptic on the issue of Japan pledging to the international community to pursue with the most talked about the tax increase. Aso claimed that Japan must be able to show to the global community that its fiscal house is in order.

Meanwhile, Prime Minister Shinzo Abe indicated signs of delaying the said tax increase due to the effect on the consumption and  economy of the first hike of 5 percent in 2014. In the first quarter, the Japanese economy was expected of growing moderately, however, the second period faces weak market demand, consumption and exports.

Prime Minister Shinzo Abe was known for its “Abenomics”. The three fold  program comprises of a huge increase in fiscal stimulus through government spending, an increase in monetary stimulus and creating structural improvements to the Japanese economy.


As the Japanese economy heads for recovery, the consumption lost momentum due to weal wage growth, Bank of Japan Governor Haruhiko Kuroda said. Kuroda affirmed that the consumer spending is not enough and the cost-push price increase will not be sustainable inflation. Among the G-7 countries, Japan has the fastest aging and shrinking population.

Elsewhere, finance ministers and central bank governors of the G-7 agreed to the conclusion of a well-known economist that the growth engine of the world is running on fumes. Aso affirmed that the G-7 believe the biggest economic problem is demand and that is the biggest problem around the  world. Since Prime Minister Aso lead Japan, he has been pushing measures to bring Japan back.

In other news, Kuroda also pointed out the after the Bank of Japan started QQE easing, the economy of Japan began to climb and that the weaker yen caused cost-push effects on CPI.


Earlier today, the yen traded lower against its U.S. counterpart as the possibility of a rate hike in June heightened. Kyosuke Suzuki, an official of Societe Generale in Tokyo, said that expectations for the rate increase aren’t gaining steam and investors remained reluctant to seek upside as they awaited on the outcome of the U.K. referendum on European Union.

Shares in Japan traded higher as the insurance, steel and automobiles & parts performed well at the close. The Nikkei Volatility advanced 0.85 percent, while the Nikkei 225 rallied 1.57  percent.

Despite the optimism towards the condition of the economy, Martin Schulz, a senior economist at the Fujitsu Research Institute, thought that the market is shinking overall. “ It makes it very difficult to get it moving again. This requires some major structural changes and these take time” the economist said.

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