WASHINGTON – The Group of 20 finance chiefs appreciated Japan’s decision last week to raise the 5 percent sales tax to 8 percent next April to restore its precarious fiscal health, Finance Minister Taro Aso said.
“We received praise for our efforts, as they are in line with the G-20 agreement that we will try to achieve a balance between economic growth and fiscal consolidation,” Aso said Friday at a news conference after the end of the finance leaders’ two-day meeting in Washington.
The tax hike is “a big step to attain the fiscal consolidation goal Japan has internationally committed to,” said Aso.
The consumption tax increase is aimed at covering mounting social security costs amid Japan’s graying population. The nation’s fiscal health is the worst among major industrialized countries, with public debt at more than 200 percent of gross domestic product.
Prime Minister Shinzo Abe’s government has promised to halve the ratio of the primary balance deficit to GDP by fiscal 2015 from the level in fiscal 2010. A deficit in the balance means the country cannot finance government spending, other than debt-servicing costs, without issuing new bonds.