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Japan to pledge 2019 tax hike to address debt mountain

Prime Minister Shinzo Abe sees raise – already delayed twice over fears it could derail the fragile economy – as essential to finance snowballing social security expenditure in the rapidly ageing society

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Japanese Prime Minister Shinzo Abe. Photo: AFP
Japan is expected to announce on Monday that it will raise the consumption tax to 10 per cent from the current 8 per cent in October 2019, in an effort to address its huge public debt.
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The world’s third-largest economy has one of the highest debt-to-GDP ratios among rich nations. Much of it is held domestically at low interest rates, allowing Japan to avoid a Greek-style cash crunch.

Critics say that raising the tax from eight to 10 per cent is crucial to finance snowballing social security expenditure – especially medical fees – in the rapidly ageing society.

Prime Minister Shinzo Abe is expected to announce the sales tax hike at a cabinet meeting, apparently having judged that Japanese households can withstand it as the economy has been recovering.

The increase – originally planned for October 2015 – has been pushed back twice due to fears it could derail the fragile economy.

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Tokyo’s last tax rise in April 2014 was blamed for pushing Japan into a brief recession.

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