Japan business lobby urges sales tax hike to proceed as planned

The head of a Japanese business lobby said a planned sales tax hike should proceed in October to sustain the social security system for a rapidly ageing population, despite calls from elsewhere to postpone it given growing economic challenges.

"Economic uncertainties persist even now but I don't think they will morph into a crisis on the scale of a Lehman shock, so I want (the hike) to proceed. With just a few months left before October, it's impossible to delay it again," said Akio Mimura, head of the Japan Chamber of Commerce and Industry.

While a tax hike could hurt growth, it would also help Japan achieve fiscal reform in the long run, which will more than offset the near-term pain, Mimura told.

The government plans to spend 2 trillion yen in offsetting measures, which Mimura said should help ease the tax hike pain "to a considerable degree". Further delays could cause confusion to many Japanese firms that have made significant preparations to overcome the shift to the 10% sales tax, Mimura added.

On monetary policy, Mimura urged the Bank of Japan to make its policy more flexible over the long run, given the increasing side effects from prolonged easing, such as a hit to banks' profits.