Japanese Official: Doubling of Sales Tax Needed to Shore Up Finances
February 20th, 2011Via: Bloomberg:
Japan needs to more than double its 5 percent consumption tax to shore up the government’s finances given soaring debt and welfare costs, a member of Prime Minister Naoto Kan’s tax and social security panel said.
“I don’t think an increase to 10 percent is enough,” former Financial Services Minister Hakuo Yanagisawa said yesterday in an interview at his office in Tokyo. “Our discussions must be based on new realities.”
Kan appointed the 75-year-old Yanagisawa to the panel that will meet for the first time on Feb. 5. Yanagisawa, a former colleague of Economy Minister Kaoru Yosano, who is leading Kan’s push for a debate on the sales tax and has advocated doubling the levy. The government is set to issue a plan on shoring up Japan’s social welfare system by June.
Concern over Japan’s rising debt, the largest in the developed world, prompted Standard & Poor’s to cut the country’s credit rating last week. Social security costs in Japan, the world’s most rapidly aging society, have risen more than 60 percent since 2000 and will account for 53 percent of government spending in the fiscal year beginning in April.
“We cannot delay work on fiscal reconstruction anymore,” said Yanagisawa, now the president of Josai International University, east of Tokyo. “Otherwise, the market reaction will become a concern.”
