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Ministers play down idea of delaying consumption tax hike

Finance Minister Taro Aso (Mainichi)

TOKYO (Kyodo) -- Japanese Cabinet ministers played down on Friday remarks made the previous day by a close aide to Prime Minister Shinzo Abe hinting at a postponement of the planned consumption tax hike in October.

The government has maintained that the consumption tax will be raised to 10 percent from 8 percent unless Japan's economy suffers a shock on the scale of the global financial crisis triggered by the 2008 collapse of U.S. investment bank Lehman Brothers Holdings Inc.

"It's necessary to raise the tax...to secure a stable source of revenue for a social security system oriented to all generations in dealing with the biggest challenge of a declining birthrate and aging population," Finance Minister Taro Aso said at a news conference.

Chief Cabinet Secretary Yoshihide Suga also reiterated the government policy after Koichi Hagiuda, executive acting secretary general of Abe's Liberal Democratic Party, said Thursday, "If the Bank of Japan's Tankan (business sentiment) survey for June shows a risky outlook...there would be a different development."

The BOJ will release the next quarterly Tankan business confidence survey on July 1.

The last Tankan survey released in April showed business sentiment among large manufacturers dropped 7 points from the previous survey to 12, the largest point fall since December 2012 when Abe's current administration was launched.

Large manufacturers forecast a further decline to 8 for the upcoming survey.

On Friday, Hagiuda explained that his statement represented his "personal view" and that he did "not intend to voice objections to the government's policy."

Hagiuda told reporters he wanted to demonstrate that he is paying close attention to economic figures and developments to prevent the economy from slowing down.

He also denied he had prior consultations with Abe and officials of the prime minister's office over the matter.

Aso, also deputy prime minister, said Hagiuda's remarks were a surprise to other high-ranking ruling party lawmakers, saying in his news conference, "At least (LDP Secretary General Toshihiro) Nikai and some others didn't know about it in advance."

Health minister Takumi Nemoto said, "It's important to fully prepare for the tax increase," while education minister Masahiko Shibayama said, "We have a consistent stance to raise the tax after taking every possible measure against a possible reduction in demand."

Some of the revenue generated from the envisioned tax hike will be used to pay for a program that will expand child care and higher education support, including free public preschool education for all children aged between 3 and 5.

Abe has twice postponed the plan to increase the consumption tax -- first from October 2015 to April 2017, and then to October this year -- after the previous hike from 5 percent in April 2014 dented consumer spending and hurt the economy.

But signs of weakness in Japan's economy shown by some economic indicators amid a slowdown in the Chinese economy have reinforced speculation that Abe may again put off raising the consumption tax.

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