The number of people in Japan aged 65 or older has reached 30.74 million, or 24.1 percent of the population, according to a government estimate released on the Respect for the Aged Day last Monday. The numbers are record highs and warn of snowballing health and welfare costs the country will soon have to face. Will Japan have enough political willpower to enforce the upcoming tax hikes and will they have a positive effect on the economy?
The major political parties enacted social security and tax reform laws in August that raise the consumption tax rate to 8 percent from 5 percent in April 2014, and to 10 percent in October 2015. Despite political wrangling, the legislation was passed with support from the opposition-leading Liberal Democratic Party and ally New Komeito.
The Cabinet Office estimates that the extra revenue will allow the government to achieve its target of halving the primary balance deficit of the central and local governments combined in fiscal 2015 from fiscal 2010 levels. However, a series of political events must take place before the tax hike actually takes effect, including a general election that could lead to the change in government.