Japan Ready To Raise Taxes

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

14 April 2010

As the Japanese government faces ever decreasing popularity in the polls, finance minister Naoto Kan told a group of reporters at the Foreign Correspondents' Club that Japan was ready to increase taxes and that it could actually help the country beat deflation if the resulting higher tax revenue was spent on creating jobs.

Tax revenue would not be spent on just reducing the public debt Kan said, adding that politicians needed to explain this to the electorate and obtain their support.

Japanese economists suggest that concerns about the sustainability of public pensions and healthcare have led to a greater propensity to save rather than spend among the younger generation, and an increase in social security funding could help allay these fears and increase consumption. MOF officials also want to see a rise in the 5% consumption tax to maintain revenues.

Although Japan's consumption tax is low compared to similar levies in other developed economies, the ruling Democratic Party stated last year that it would not increase the consumption tax in its four year term.

Kan also said that a fiscal reconstruction bill was under preparation which would set certain fiscal targets.

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