US economist Dale Jorgenson on Thursday advised Japanese Prime Minister Shinzo Abe to stick with his combination of raising sales taxes and lowering corporate taxes as the best way to increase productivity and investment.
Jorgenson also praised Abe for adopting a fiscal policy that has been able to reduce the budget deficit and urged Japan and the United States to continue with sustainable fiscal policy.
Abe is meeting foreign economists ahead of a Group of Seven summit he will host in May, but there is a growing sense he will heed the call of the Group of 20 for more fiscal spending with economic stimulus and a delay in sales tax hikes, some economists say.
"It is important to stimulate productivity by shifting the burden of taxation from production to consumption," said Jorgenson, a professor at Harvard University.
"That is exactly what Japan has been doing and is what Japan will continue doing in the future."
Abe is scheduled to raise the nation-wide sales tax to 10 percent from 8 percent next April, but some of his closest advisers are calling for the plan to be shelved.