Japan PM to hike sales tax to ease debt burden

TOKYO (AFP) - Japanese Prime Minister Shinzo Abe will hike the nation's sales tax, Jiji Press news agency said on Tuesday, in a move seen as crucial to chopping a massive national debt.

Mr Abe told a meeting of government and ruling party policymakers that the increase was aimed at "maintaining the nation's trust and handing over a sustainable social security system to the next generation", Jiji reported.

The 59-year-old premier added that he would also unveil an economic stimulus package to "ease the impact" of a tax rise that critics fear will derail Japan's budding recovery.

The move marks a big political gamble for Mr Abe - previous hikes have proved career-ending for his predecessors.

Tuesday's confirmation ends months of uncertainty about whether the Japanese leader would press on with raising sales taxes to 8.0 percent from 5.0 percent, still far lower than in many wealthy countries.

Economists estimate the impact on households at some 8.0 trillion yen (S$101 billion), dealing a blow to consumer demand just as the world's third-largest economy is picking up.

Details of the package are to come later Tuesday. Abe is expected to unveil a one-time US$50-billion package with benefits for low-income earners and corporate incentives to boost investment and wages.

He may also speed up the timeline for getting rid of a special corporate tax ushered in after the 2011 quake-tsunami disaster.