‘Japan will raise sales tax to 10pc as planned’

TOKYO: Japan’s top government officials vowed yesterday to stick to a planned sales tax hike in October, barring a big economic shock, putting an end to speculation that it could be delayed again.

Koichi Hagiuda, acting secretary-general of Prime Minister Shinzo Abe’s Liberal Democratic Party, said on Thursday the planned tax hike might be postponed depending on the results of the central bank’s next tankan business survey due in July.

His comments fuelled concerns about a further delay in Japan’s efforts to finance its bulging social security costs.

The country has to support a fast-ageing population and constrain growing public debt — more than twice the size of its economy.

It also fanned speculation about a possible snap lower house poll to coincide with an upper house election this summer to seek feedback from voters in case Abe moved to delay the tax.

“The sales tax hike to 10 per cent is needed the most to secure stable financial resources to pay for social security for all generations,” said Finance Minister Taro Aso after a cabinet meeting.

Chief cabinet secretary Yoshihide Suga also said the government would proceed with the tax hike unless there was a big incident, such as the shock collapse of Lehman Brothers in 2008.

Hagiuda also said yesterday he was merely expressing his “personal opinion” and did not mean to object to the tax hike, which he did not discuss with Abe. However, he stressed the need to watch the upcoming tankan and other indicators closely to gauge the strength of the economy.

Many Japanese firms want the authorities to go ahead with the planned tax hike, a monthly poll showed, in a sign firms stand ready for the higher levy.