Finance Minister Sadakazu Tanigaki said Thursday the 5 percent consumption tax should be raised to 8 percent by fiscal 2011.
“A hike of 1 to 2 points would be enough to cover the planned increase in the state’s share of the costs of the basic national pension program in fiscal 2009, but a little more of an increase will be needed,” Tanigaki, who announced his candidacy for the Liberal Democratic Party presidency last week, said on a radio program.
“I need to consider details, but I think a hike of about 3 points will be needed” to attain the government’s goal of posting a surplus in the primary balance — tax revenues minus outlays other than debt-servicing costs — in fiscal 2011, he said.
In announcing his bid to succeed Prime Minister Junichiro Koizumi, whose LDP presidency expires in September, Tanigaki proposed doubling the consumption tax to 10 percent midway into the next decade as a way of restoring the country’s financial health.
He later said the proposed hike should be implemented in two stages. Thursday’s remarks indicate Tanigaki hopes to first raise the tax by 3 points by 2011 and by 2 points later.
IMF drops tax-hike hint
International Monetary Fund Managing Director Rodrigo de Rato suggested on a visit here Thursday that it might be necessary to raise the consumption tax and take other revenue enhancement measures to restore Japan’s fiscal health.
Fiscal reform cannot be achieved with spending cuts alone, he told reporters after he met with Prime Minister Junichiro Koizumi earlier in the day.
In regard to the structural reform program of the Koizumi government, Rato said it was instrumental in bringing deflation under control.
He also called appropriate the Bank of Japan’s monetary policy management, whereby the BOJ finally raised interest rates in mid-July after flooding the banking system with ample liquidity and keeping interest rates near zero for years.
The IMF had said in its report released July 28 that Japan is on a “strong recovery path” and that its deflation in effect has ended, raising the country’s real economic growth estimate to 2.9 percent for 2006 from its April projection of 2.8 percent.
According to the IMF chief, Koizumi said that further measures must be taken to completely rid the economy of deflation and step up economic reform.
The prime minister also expressed hope for further progress on economic and financial integration in Asia, he said.
The IMF chief arrived in Tokyo on Wednesday for talks with Japanese officials, including Koizumi, Finance Minister Sadakazu Tanigaki and BOJ Gov. Toshihiko Fukui, on proposed reforms of the IMF.
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