A consumption tax hike is not likely in the next three years now that Taro Aso is prime minister, according to economic and fiscal policy minister Kaoru Yosano.
Yosano, who retained his portfolio when Aso formed his Cabinet, also admitted that economic recovery will depend on a resurgence of overseas demand because Japanese consumers are "cautious" and won't provide the necessary boost that the economy requires.
Aso has said the slowing economy will take three years before it expands again and that he will not raise the 5 percent consumption tax during that period.
"Now that Aso, as the Liberal Democratic Party president and the prime minister, has decided not to raise the tax for the next three years, the party's study panel is likely to go ahead with discussions of his policies," Yosano said in an interview Thursday.
Given swelling welfare costs and a rapidly aging population, the government of former Prime Minister Yasuo Fukuda compiled guidelines that mention the need to undertake comprehensive tax reform, including a higher consumption tax, to secure enough revenues to meet the costs.
Aso has pledged efforts to rejuvenate the economy, which is being hurt by the effects of the slowdown and credit crunch in the United States, and indicated he would not adopt unpopular policies, including tax hikes, in the runup to the general election widely expected by yearend.
But Yosano, known as a keen advocate of fiscal reconstruction and higher taxes, said he will strive to present citizens with a "clear road map" on tax reform.
