Japan raises sales tax to 10% amid signs economy weakening

Tokyo, Japan’s national sales tax was raised to 10% from 8% on Tuesday, amid concerns that the long-delayed move could derail the fragile growth path of the world’s third largest economy.

Officials said ample measures were taken to cushion the impact of the hike after previous tax increases a 2-point increase to 5% in 1997 and another to 8% in 2014 brought on recessions, according to The Associated Press (AP).

Prime Minister Shinzo Abe postponed this hike twice but said it was unavoidable given rising costs for elder care and a growing national debt as the population ages and shrinks. After decades of fiscal deficits that have taken the debt to more than twice the size of the economy, Abe has promised a return to balance by 2025, but that will require growth to be sustained at a healthy pace.

The sales tax hike coincided with the release of data showing business sentiment among large manufacturers worsening in September to its worst level since 2013.

The result was better than expected, but the outlook is forecast to deteriorate further by December’s quarterly report of the Bank of Japan’s survey, called the “tankan.”

Source: Bahrain News Agency