Japan Must Consider Rise In Consumption Tax Says Top Finance Ministry Official

by Mary Swire, Tax-News.com, Hong Kong

06 July 2004

Speaking last week, Japan’s new vice-finance minister, Koichi Hosokawa, reopened the debate surrounding a possible hike in the country’s consumption tax in a bid to help solve a growing fiscal crisis.

"The situation surrounding Japan's fiscal condition is the worst, if you look at it internationally," observed Hosokawa who occupies the top bureaucratic post at the ministry of finance.

Noting that Japan’s debt represents more than 90% of its gross domestic product, he warned: "I think we are in a critical situation as to whether Japan can afford to let its debt-ridden finances continue".

Therefore it is important that the public debate into the raising of additional revenues, particularly through a possible hike in the 5% consumption tax, should continue, Hosokawa told a regular press conference.

Consumption tax became something of a political hot potato last year when one of the key recommendations of the government’s Tax Commission was a rise in the levy to help fund Japan’s pension and social security system, under pressure from an ageing population.

However, Prime Minister Junichiro Koizumi dismissed the suggestion out of hand and vowed not to increase consumption tax whilst he remained in office.

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