World News

Japan Rolls Out Controversial Tax Hike

Japanese Prime Minister Shinzo Abe is going ahead with a controversial sales tax hike to help reduce the country's massive public debt.

Mr. Abe on Tuesday announced the long-anticipated plan to raise the consumption tax from 5 percent to 8 percent by April of next year.



"In order to maintain confidence in the country and pass sustainable social security to the next generation, I have decided to raise the tax of the central and local governments from 5 percent to 8 percent on April 1, 2014."



The tax will raise an estimated $81 billion a year. It represents the first major effort since 1997 to reduce Japan's national debt, which at over $10 trillion is the largest in the industrial world.



Masamichi Adachi, a senior economist at J.P. Morgan in Tokyo, tells VOA he views the tax increase as a necessary initial part of addressing Japan's fiscal woes.



"This tax hike is definitely not enough to overcome the challenge that Japan faces with its huge government debt and deteriorating demographics in terms of aging population. However, this is a first step."



The move comes after a quarterly survey by the Bank of Japan showed business confidence rose to a five-year high, in what was seen as another crucial indicator that Japan's economy is recovering from years of stagnation.

Mr. Abe's economic strategy, known as Abenomics, has seen positive results since his December election. Stocks have surged and the economy posted the highest annualized growth rate among G7 nations in the first half of this year.



But some worry the new tax will hurt consumer demand and damage Japan's fragile growth. To offset those concerns, Mr. Abe announced a stimulus package that includes tax breaks for low-income earners and corporate incentives to boost wages.

More details of the stimulus package were expected to be unveiled later Tuesday. Tomohiko Taniguchi, an Abe advisor, declined to comment on the specifics of the stimulus during an interview with VOA.



"The aim is to smooth out the downside risks pertaining to the rise of the rate for the consumption tax, because Japanese deflation has been sticky for so many years and we're not so clear as yet that we have succeeded in getting rid of deflation."



The tax hike also represents a significant political risk for Mr. Abe. Two of his predecessors in recent decades were forced out of office shortly after raising the tax.

But Taniguchi says this time is different, partly because of recent positive economic indicators, and also due to Mr. Abe's strong performance in upper house elections in June.



"Prime Minister Abe has amassed such a large amount of political capital. I think the amount is probably among the biggest for recent prime ministers in Japan, so he is pretty confident that he can carry out these (plans)."



Abenomics relies on boosting public spending in order to spur growth and aggressive monetary easing, or increasing the money supply, to help fight deflation.

But the third so-called "arrow" of Mr. Abe's plan involves structural reforms to Japan's economy that could prove to be painful and more politically difficult.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs