Japan business lobby urges sales tax hike to proceed as planned | The Daily Star
12:00 AM, May 31, 2019 / LAST MODIFIED: 12:06 AM, May 31, 2019

Japan business lobby urges sales tax hike to proceed as planned

The head of a Japanese business lobby said a planned sales tax hike should proceed in October to sustain the social security system for a rapidly ageing population, despite calls from elsewhere to postpone it given growing economic challenges.

The intensifying Sino-US trade war and slowing Chinese economy threaten to derail Japan’s export-reliant economy, keeping alive expectations that Prime Minister Shinzo Abe may forego a twice-delayed increase in the national sales tax.

“Economic uncertainties persist even now but I don’t think they will morph into a crisis on the scale of a Lehman shock, so I want (the hike) to proceed,” said Akio Mimura, head of the Japan Chamber of Commerce and Industry, which represents Japanese small and medium-sized businesses.

“With just a few months left before October, it’s impossible to delay it again.”  While a tax hike could hurt growth, it would also help Japan achieve fiscal reform in the long run, which will more than offset the near-term pain, Mimura told Reuters in an interview conducted on Wednesday.

Japan needs revenue to pay for bulging welfare costs to support an ageing population and curb the industrial world’s heaviest public debt burden, which is twice the size of its $5 trillion economy.

The government plans to spend 2 trillion yen ($18.3 billion) in offsetting measures, which Mimura said should help ease the tax hike pain  “to a considerable degree”.

Further delays could cause confusion to many Japanese firms that have made significant preparations to overcome the shift to the 10 percent sales tax, Mimura added.

His view is shared by other Japanese corporations: more than 60 percent of firms called for the sales tax to rise as planned, a Reuters Corporate Survey showed last month, although they felt that additional stimulus was needed to cushion the blow on the economy.

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