Japan asks sales tax of world leaders in finance to increase as expected

WASHINGTON (Reuters) – Japanese Finance Minister Taro Aso on Saturday promised world finance officials that Tokyo would increase sales tax in October, even as the weakening of global growth was clouding the prospects for the world's economy. an export-oriented economy.

Rumors that Prime Minister Shinzo Abe could postpone the two-time sales tax increase are facing an election in the Upper House later this year due to mounting signs of weakness. economy.

The Prime Minister has repeatedly stated that the rise would continue unless Japan is hit by a shock the magnitude of the collapse of Lehman Brothers in 2008.

Aso has not made any such qualification by pledging to increase the rate.

"We will increase the rate of the consumption tax from 8% to 10% in October," said Aso in a statement to the steering committee of the International Monetary Fund.

"Thanks to this increase in the tax rate, we will succeed not only in consolidating public finances in the medium and long term, but also in achieving inclusive growth," using part of the proceeds to provide free education to early childhood.

Although the slowdown in global growth weighs on the Japanese economy, its fundamentals remain strong, as the labor market is tight and corporate profits support private consumption and capital spending, Aso said.

"The Japanese economy as a whole continues to recover moderately, mainly due to domestic demand," he said.

It is considered important to raise the sales tax rate so that Japan can control its huge public debt, twice as large as its economy, and pay the rising cost of financing social protection for a rapidly aging population.

The IMF proposed that Japan increase tax expenditures instead of postponing tax increases if the risks to the economy materialize.

A recent Reuters poll showed that most economists expect Japan to apply a higher tax.