Japan’s Prime Minister is set to make a decision on whether or not to increase the nation’s sales tax on October 1^st.

Akira Amari, Japan’s Economic and Fiscal Policy Minister, says Shinzo Abe will make his decision once he gets a good look at the quarter’s Gross Domestic Product data.  Preliminary data released by the Cabinet Office shows an annualized 3.8% growth expansion, a figure up from a preliminary 2.6% calculation.  Financial analysts say the number signal that a solid economic recovery is stirring in Japan.

The strengthening economy increases the likelihood that Abe will proceed with a planned sales tax hike in the fiscal year ahead.  If all goes as predicted, Abe will make the announcement 2½ weeks from now.  The Prime Minister had said earlier that he would make his decision based upon the GDP data.  It appears now that Japan’s sales tax will increase to 8% next April, up from the current 5%.  The rate would rise again to 10% in October 2015.

Economic Minister Amari says that if the government presses ahead with the planned tax increase, it will also alter the budget.  Amari says Abe will create a supplemental budget that accounts for extra money available for fiscal spending in the year ahead. Amari calls it a “cushion” against damage to the economy, and promises the administration will submit appropriate fiscal bills to the Diet early in the new year.  Tax increase critics continue to call for either stalling the tax hike, or reducing the percentage, based upon concerns the new taxes could impact the fledgling economic recovery.

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