Japan unveils sales tax hike
Japan on Monday announced a much anticipated sales tax hike in 2019 to address the nation's huge public debt, despite warnings it could hobble growth in the world's third-biggest economy.
The point-of-sale tax will rise from eight percent to 10 percent from October next year as ageing and heavily indebted Japan battles to finance snowballing social security bills -- especially medical fees.
The tax rise was originally planned for October 2015 but was pushed back twice due to fears it could derail the fragile economy.
The last such move -- in April 2014 -- was blamed for tipping Japan into a brief recession.
This time, Prime Minister Shinzo Abe believes he can avoid a sharp decline in consumer spending by introducing measures to cushion the blow.
The government "will do its best to avoid a negative impact on the economy by taking every possible measure," Chief Cabinet Secretary Yoshihide Suga told reporters.
However, Suga added that the planned hike could still be scrapped if there were a potentially historic recession like a global slump triggered by the 2008 collapse of Lehman Brothers.
The measures will include plans to leave the sales tax on food unchanged at eight percent, Suga said.
The government also plans subsidies to offset the impact of the sales tax hike on some durable goods such as houses and environmentally friendly cars.
And the proceeds from the tax hike will go in part to fund free nursery places to ease the impact on families and encourage Japanese to have more babies, as the population continues to shrink at a fast pace.
“I don't think the sales tax this time will create a setback in the economy," Hideo Kumano, chief economist at Dai-ichi Life Research Institute, told AFP, adding that a hoped-for rise in wages would be critical.
The measures to mitigate the impact on consumption and an expected rise in salaries next year should be enough to absorb a shock from falling disposable income, he said.
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