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BOJ dissenter warns tax hike poses threat to economy and prices

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Bank of Japan board member Yutaka Harada warned a sales tax rise set for October could tip the economy into recession and weigh on prices, delaying progress toward the central bank's 2 per cent inflation target.

[TOKYO] Bank of Japan board member Yutaka Harada warned a sales tax rise set for October could tip the economy into recession and weigh on prices, delaying progress toward the central bank's 2 per cent inflation target.

Mr Harada's comments come two days after the government reported unexpected growth in the economy - indicating the data hadn't convinced him the economy was on solid footing. Some economists said the numbers would cool a growing debate over the wisdom of going ahead with the tax hike.

It's rare for BOJ policy maker to talk frankly about the risks of the tax increase. But it wasn't the first time for Mr Harada, a consistent dissenter on central bank policy. He made the comments in a speech to business leaders in Nagasaki on Wednesday.

Prime Minister Shinzo Abe and his ministers have insisted the tax increase - twice delayed already - will take place as planned. The rise in April 2014 to 8 per cent caused a sharp contraction in the economy and prompted the BOJ to increase its stimulus.

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Mr Harada said the BOJ stands ready to do the same again, if necessary.

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