Regarding the June 3 Kyodo article “Plan outlines 10% hike in sales tax”: A flat increase in the consumption tax is a real “no brainer” and already more than overdue. Ten percent will not even be enough. The Japanese government must consider increasing it to 15 or even 19 percent, since the whole system of social security and medical care is not just problematic but heading for a disastrous default on public debt, if unchecked.
What has saved us until now from financial Armageddon has been the financing of most public debt by Japanese people’s purchase of government bonds. Huge amounts of debt have been financed via the postal system — with savings converted into bonds. This has kept interest rates on debt very low despite the mind-boggling public debt/GDP ratio of nearly 200 percent.
As soon as the aging population starts to withdraw the value of their bonds, and since young Japanese don’t have the financial strength to buy new (underperforming) Japanese government bonds, the government will have to turn to international investors and interest rates will skyrocket!
So, instead of playing pathetic games, like no-confidence maneuvers, in the Diet, the government needs to switch on its brains, if it has any, and start balancing the books. Very painful adjustments will be needed, including deflating the mammoth public sector and increasing taxes. Many Japanese people are ready for it. Are our politicians? Many of my Japanese friends and I doubt it very much and are preparing for the worst.
The opinions expressed in this letter to the editor are the writer’s own and do not necessarily reflect the policies of The Japan Times.
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