Japan to raise sales tax in 2019 to ease public debt

15 Oct 18

Japanese prime minister Shinzo Abe has announced a sales tax hike in 2019 to address public debt caused by ballooning social security costs.

The consumption tax will rise two percentage points to 10% from October next year, he announced today.

The tax rise was originally planned for 2015 but has been pushed back twice due to fears that it could derail the economy.

This comes as the country battles to finance social security bills, which Abe has previously said is “the biggest challenge” facing his government.

Chief cabinet secretary Yoshihide Suga said the prime minister had asked ministers to come up with measures to mitigate the negative impact of the tax hike, according to The Japan Times.

The last time that consumption tax was raised from 5% to 8% in 2014, Japan went into a brief recession.

But the government has said another hike is necessary to pay for the growing medical and nursing care costs, as a result of the rapidly ageing population.

Abe made the announcement during a cabinet meeting this morning, where he said: “We based [our decision] on the lessons we learned from the previous 3 percentage point increase, [and] will do our utmost to minimise the negative impact on the economy by implementing all sorts of policies.”

Part of the expected revenue from the tax increase will go to expanding child care support, including preschool education, which Abe promised to do during the 2017 Lower House elections.

Japan pushed back its fiscal targets in January, with Abe saying he was expecting a primary budget surplus by 2027, two years later than previously projected.

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