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Abe
is meeting overseas economists to help him prepare for a Group
of Seven summit that Japan will host in May. Krugman also called
on G7 countries to coordinate stimulus measures because many
advanced and emerging economies are struggling with low demand.
Krugman's advice was the same as that which fellow U.S.
economist Joseph Stiglitz gave Abe last week. This could cement
expectations that Abe will use the G7 talks as a platform to
postpone tax increases and announce more fiscal spending.
"Japan still has not achieved escape velocity to break out of
its deflationary cycle," said Krugman, a Graduate Center of the
City University of New York professor and Nobel Prize winner.
"I would call for a delay in the consumption tax hike. Japan
needs fiscal policy to reinforce monetary policy and not fight
it."
Abe is scheduled to raise a national sales tax to 10 percent
from 8 percent in April next year, but some of Abe's closest
advisers are calling for the plan to be shelved.
Abe raised the levy to 8 percent from 5 percent in April 2014,
as agreed under the previous government to curb Japan's big
public debt, but the increase triggered a recession and some
economists say consumer spending has not fully recovered.
Krugman said weakness in the global economy made it difficult
for Japan to solve its economic problems, which made fiscal
stimulus a more urgent task.
The G20 called at a summit last month for more fiscal spending
and less reliance on monetary policy to help the fragile global
economy, which some investors say has reached its limit after
years of quantitative easing and negative real interest rates.
(Reporting by Stanley White; Editing by Robert Birsel)
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