The benefits of Prime Minister Shinzo Abe’s plan to raise Japan’s sales tax and spend some of the revenue on education and welfare outweigh the negatives, an official at ratings agency Moody’s Investors Service said on Tuesday.The exact timing of when Japan achieves a primary budget surplus is not that important as long as the government is committed to fiscal reform in the medium term, Christian de Guzman, a vice president of sovereign ratings at Moody’s, told Reuters in an interview.
Abe’s structural reforms are starting to support economic growth, and the risks to Japan’s sovereign rating remain balanced, he said. Abe dissolved the lower house of parliament last month and called a snap election for Oct. 22. A central plan of his campaign is that he wants to go ahead with a sales tax hike in October 2019 and use some of the funds to subsidise education for pre-schoolers instead of paying down debt. Moody’s rating on Japan is A1, which is four notches below its top rating. Its outlook for Japan is stable.