Japan to soften sales tax blow

GAMES GROWTH::Japanese Prime Minister Shinzo Abe made the decision based on upbeat economic data and Tokyo’s successful bid to host the 2020 Summer Olympics

AFP, TOKYO

Fri, Sep 13, 2013 - Page 15

Japanese Prime Minister Shinzo Abe has decided to raise the nation’s sales tax next year, but will soften the blow with a US$50 billion stimulus package aimed at protecting a budding economic recovery, reports said yesterday.

Abe, who has spearheaded a drive to turn around years of tepid growth, will press on with a plan to lift taxes to 8 percent from the current 5 percent in April next year, Japanese media reported, a move seen as crucial to tackling a staggering national debt.

Parliament has already passed a law to raise the rate, but Abe had yet to make a decision on whether to enact it amid concerns higher taxes would hit consumer demand and blunt a nascent recovery in the world’s No. 3 economy.

The reports from the Kyodo and Jiji Press news agencies yesterday did not make it clear if another scheduled tax rise to 10 percent by late 2015 was still in the pipeline.

However, Abe will also launch a fresh economic package worth about ¥5 trillion (US$50 billion) to cushion the increase, the news agencies and the top-selling Yomiuri Shimbun said, with Kyodo citing a source close to the prime minister.

Abe is expected to formally announce the plan on Oct. 1 at the earliest, they said.

Broadcaster Asahi said Abe made his decision based on recent upbeat economic data and Tokyo’s successful bid to host the 2020 Olympic Games, which is expected to boost growth. However, the government disputed the reports, saying Abe had yet to make up his mind.

“The prime minister will decide early next month” after examining the economic data, Japanese Chief Cabinet Secretary Yoshihide Suga told a Tokyo press briefing.

However, Suga did acknowledge that Abe had ordered his ministers to draw up a stimulus plan as “there would be an impact on the economy if the consumption tax is raised.”

The Bank of Japan is to publish a closely watched quarterly business sentiment survey next month, which will be pored over for more clues about the state of the country’s economy.

Tokyo has faced increasing pressure, including from the IMF, to service a debt mountain that is proportionately the worst among industrialized nations at more than twice the size of the economy.