Following his Liberal Democratic Party’s win in the Upper House elections, Japanese Prime Minister Shinzo Abe has commented that he will need to continue observing the country’s economic conditions with regard to a scheduled sales tax increase early next year. Abe said that he hopes to reach a decision by the autumn months, referring to the consumption tax hike that was approved in late 2012 under then prime minister Yoshihiko Noda, of the opposing Democratic Party of Japan.
Abe says that he first wants to the figures for the April-June GDP, and then choose what will be best for overcoming economic deflation, achieving a period of growth, and restoring Japan’s fiscal health. “It will be a difficult decision. The economy is just starting to recover and now is the best chance for Japan to emerge from deflation. I don’t want to lose this chance. At the same time, markets are watching (progress) on Japan’s fiscal reform.”
During premier Noda’s year in office, he repeatedly stated that prime objective was to raise Japan’s sales tax from 5% to 10%, as it was a lynchpin in fighting the country’s snowballing public debt. With more and more elderly approaching retirement age, combined with a shrinking population, Noda was among those fearing a rapid collapse of the pension system. After months of quarreling between the DPJ and LDP, the two parties finally reached agreements that saw parliament approve of a 3% tax increase in April 2014, followed by another 2% hike in October 2015.
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