Talk that the Bank of Japan (BOJ) could ramp up its aggressive monetary easing program should the government press ahead with a controversial rise in the country's sales tax is gaining ground.
Citing several sources, Japan's Asahi newspaper reported earlier this week that the BOJ would consider further monetary easing if a rise in the consumption tax goes through. The BOJ offered some clarification on Thursday, saying it would only expand its stimulus program if the sales tax hike became a hurdle in its quest to achieve its 2 percent inflation target in two years.
In the run up to Prime Minister Shinzo Abe's final decision next month, there has been a heated debate about the consumption tax, which is scheduled to rise from 5 percent to 8 percent next April, and to 10 percent in October 2015. Two camps have emerged: those that argue a tax rise is crucial to alleviating Japan's fiscal position and those who feel it will undermine the country's economic recovery.