Has a Proper Environment Come Together for Raising the Consumption Tax?(Aug 2013)
Compared to 1997, domestic demand firm; some uncertainty remains in China and other foreign economies
August 30, 2013
Summary
◆Economic outlook revised: In light of the first preliminary Apr-Jun GDP release (Cabinet Office), we have revised our economic growth outlook. We now forecast real GDP growth of +3.0% y/y for FY13 (previous forecast: +3.1%) and +1.2% for FY14 (+0.7%). We have assumed the formation of the FY13 supplementary budget of around Y3 trillion (new spending basis) and have accordingly revised our FY14 outlook upward.
◆Has a proper environment come together for raising the consumption tax?: In this report, we provide a multifaceted examination of the pros and cons of raising the consumption tax. At the present moment, we believe that a proper environment has come together for raising the consumption tax as scheduled. Compared to 1997 when the consumption tax was last raised, domestic demand is expected to trend firmly. There will be a need, however, to carefully assess the risk of a downswing in China and other foreign economies.
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