TOKYO -- Prime Minister Shinzo Abe announced on Oct. 15 that his government will raise the consumption tax from 8 percent to 10 percent on Oct. 1, 2019, as planned, in a bid to secure funds to implement his "all-generation" social welfare policies including free education for young children.
Abe made the announcement during an emergency Cabinet meeting at the premier's official residence in Tokyo, and instructed his ministers to take measures to prevent the tax hike from slowing down the economy.
"We must tackle national crises such as aging and lower birthrates head on," Abe told his ministers in announcing the tax rise. "We will turn around our social welfare system toward one that covers all generations, while reforming our fiscal structure."
The decision came after Abe postponed the hike twice out of concerns for its negative economic impact.
Such countermeasures will be incorporated into the state budgets for fiscal 2019 and 2020. They will possibly include a program under consideration to subsidize small- and medium-sized retailers issuing points for cashless purchases equivalent of tax hike amounts that can be used in later transactions.
Tax cuts on purchases of environment-friendly cars, and on mortgaged homes will also be extended or expanded. Lifting the ban on offering discounts for the amounts of consumption tax after the introduction of the hike is also being considered. The measure is aimed at preventing sales from going down after the tax rise, cooling the economy and reducing tax revenue.
Japan's Gross Domestic Product (GDP) shrunk for two quarters in a row when the consumption tax was raised from 5 percent to 8 percent in April 2014, slowing down the economy more than expected. But this time, the government plans to keep the tax rate for food items at 8 percent and funnel about 2 trillion yen of the new tax revenue into free educational programs in a bid to reduce economic damage.
(Japanese original by Katsuya Takahashi, Political News Department, and Shinpei Ide, Foreign News Department)