Japanese Voters Wary Of Tax Hike

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

13 July 2010

Japan’s Prime Minister Naoto Kan suffered a backlash from voters over fears that his government will double the country’s consumption tax rate to 10% over the next few years. The Japanese electorate returned a resounding snub for the Prime Minister’s ruling Democratic Party of Japan (DPJ) in the Upper House elections, with the party winning only 44 seats – 10 less than the Prime Minister’s target.

Exit polls conducted during the election showed that the public’s principal concern was the threat of a doubling of the rate of consumption tax, which affects all sectors of society. The possible increase in this tax was one of a number of measures put forward by the DPJ and the result of the poll may endanger Japan’s chances of economic recovery.

Though the DPJ still controls the more influential Lower House, Japan’s economy is recovering slowly and is fragile. The instability within the ruling DPJ may jeopardize the speed at which the country recovers, particularly if the spectre of a hike in consumption tax persists.

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