The International Monetary Fund on Wednesday recommended Japan gradually lift its consumption tax to 15 percent, beginning in fiscal 2011, to restore the nation's public finances amid ballooning public debts.
"Fiscal adjustment should start in fiscal 2011 beginning with a modest consumption tax hike," the IMF said in a report after annual talks with the Japanese government and the Bank of Japan.
"A gradual increase of the consumption tax to 15 percent beginning in fiscal 2011 and distributed over several years, could generate 4 percent to 5 percent of gross domestic product of revenue," it said.
Noting the importance of comprehensive tax reform, the IMF said the consumption tax hike could be combined with a reduction of personal income tax allowances and corporate tax reform to stimulate domestic investment.