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.
Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemeni
Henry Ridgwell
October 12, 2015 4:03 PM
The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemen

The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video No Resolution in Sight to US House Speaker Drama

Uncertainty grips the U.S. Congress, where no consensus replacement has emerged to succeed Republican House Speaker John Boehner after his surprise resignation announcement. Half of Congress is effectively leaderless weeks before America risks defaulting on its national debt and enduring another partial government shutdown.

Video New Art Exhibit Focuses on Hope

Out of struggle and despair often comes hope. That idea is behind a new art exhibit at the American Visionary Art Museum in Baltimore, Maryland. "The Big Hope Show" features 25 artists, some of whom overcame trauma and loss. VOA’s Deborah Block reports.

Video Columbus Day Still Generates Controversy as US Holiday

The second Monday of October is Columbus Day in the United States, honoring explorer Christopher Columbus and his discovery of the Americas. The achievement is a source of pride for many, but for some the holiday is marked by controversy. Adrianna Zhang has more.

Video Anger Simmers as Turks Begin to Bury Blast Victims

The Turkish army carried out new air strikes on Kurdistan Workers Party (PKK) targets on Sunday, a day after the banned group announced a unilateral cease fire. The air raids apparently are in retaliation for the Saturday bombing in Turkey's capital Ankara that killed at least 95 people and wounded more than 200 others. But as Zlatica Hoke reports, there are suspicions that Islamic State is involved.

Video Bombings a Sign of Turkey’s Deep Troubles

Turkey has begun a three-day period of mourning following Saturday’s bomb attacks in the capital, Ankara, that killed nearly 100 people. With contentious parliamentary elections three weeks away, the attacks highlight the challenges Turkey is facing as it struggles with ethnic friction, an ongoing migrant crisis, and growing tensions with Russia. VOA Europe correspondent Luis Ramirez reports.

Video Afghanistan’s Progress Aided by US Academic Center

Recent combat in Afghanistan has shifted world attention back to the central Asian nation’s continuing civil war and economic challenges. But, while there are many vexing problems facing Afghanistan’s government and people, a group of academics in Omaha, Nebraska has kept a strong faith in the nation’s future through programs to improve education. VOA’s Greg Flakus has more from Omaha, Nebraska.

Video House Republicans in Chaos as Speaker Favorite Withdraws

The Republican widely expected to become the next speaker of the House of Representatives shocked his colleagues Thursday by announcing he was withdrawing his candidacy. The decision by Majority Leader Kevin McCarthy means the race to succeed retiring Speaker John Boehner is now wide open. VOA National Correspondent Jim Malone reports.

Video German, US Officials Investigate Volkswagen

German officials have taken steps to restore some of the reputation their car industry has lost after a recent Volkswagen diesel emissions scandal. Authorities have searched Volkswagen headquarters and other locations in an effort to identify the culprits in the creation of software that helps cheat on emission tests. Meanwhile, a group of lawmakers in Washington held a hearing to get to the bottom of the cheating strategy that was first discovered in the United States. Zlatica Hoke reports.

Video Why Are Gun Laws So Hard for Congress to Tackle?

Since taking office, President Barack Obama has spoken out or issued statements about 15 mass shootings. The most recent shooting, in which 10 people were killed at a community college, sparked outrage over the nation's gun laws. But changing those laws isn't as easy as many think. VOA's Carolyn Presutti reports.

Video In 'He Named Me Malala,' Guggenheim Finds Normal in Extraordinary

Davis Guggenheim’s documentary "He Named Me Malala" offers a probing look into the life of 18-year-old Malala Yousafsai, the Pakistani teenager who, in 2012, was shot in the head by the Taliban for standing up for her right to education in her hometown in Pakistan's Swat Valley. Guggenheim shows how, since then, Malala has become a symbol not as a victim of brutal violence, but as an advocate for girls’ education throughout the world. VOA’s Penelope Poulou has more.

Video Paintable Solar Cells May Someday Replace Silicon-Based Panels

Solar panels today are still factory-manufactured, with the use of some highly toxic substances such as cadmium chloride. But a researcher at St. Mary’s College, Maryland, says we are close to being able to create solar panels by painting them on a suitable surface, using nontoxic solutions. VOA’s George Putic reports.

VOA Blogs