Japan to propose sales tax rise to 10pc next month: media

TOKYO: Japan will decide next month to propose raising its consumption tax to 10 percent from the current 5 percent by 2015 to fund growing social security costs in a rapidly ageing society, the Yomiuri newspaper said on Monday

Local media have reported that Japan is considering a proposal to increase the tax, which is among the lowest in major economies, although successive governments have put off tackling the politically-sensitive issue.

The government and key members of the ruling coalition parties will set up a panel to start discussions from next week and decide on the tax hike proposal as early as mid-June, the paper added.

Prime Minister Naoto Kan, under fire for his handling of the nuclear crisis after the March 11 quake and tsunami, has made social security and tax reform key to his policy agenda.

But the unpopular premier is likely to face difficulties in enacting any bill on the tax hike in a divided parliament given persistent worries among lawmakers that such a move could anger voters and weaken the economy.

Many economists say, however, Japan needs to raise the tax to fund rising social welfare costs, given its bulging debt almost twice the size of its $5 trillion economy.

Copyright Reuters, 2011