Japan PM Abe's party vows to hike sales tax in platform for July election

Japan Prime Minister Shinzo Abe's government has tried to soften the blow by saying part of the revenue has been earmarked to subsidise pre-school education and childcare.
Japan Prime Minister Shinzo Abe's government has tried to soften the blow by saying part of the revenue has been earmarked to subsidise pre-school education and childcare.PHOTO: AFP

TOKYO (BLOOMBERG) - Japan's long-ruling Liberal Democratic Party pledged to go ahead with a sales tax increase in its policy platform for an Upper House election expected in July, signalling it will stick to an unpopular policy that the government has postponed before.

Backing a hike in the tax to 10 per cent from 8 per cent in October was among the positions in a ruling party policy document released on Friday (June 7).

Speculation had swirled that Prime Minister Shinzo Abe could halt the increase, as he has done twice before, amid growing concern about the economic effect of the US-China trade war.

The sales tax increase is intended to help rein in the world's biggest debt load, which stems from increased social welfare spending for Japan's rapidly aging population.

The government has raised it twice since it was introduced in 1989, and both times saw an economic slide.

Senior government officials have repeatedly said that only an economic blow on the scale of the 2008 financial crisis would prompt a further delay. The LDP-led coalition is set to retain its majority in the Upper House, polling has indicated.

Yet surveys show the tax increase is disliked by voters, with 54 per cent of respondents to an Asahi newspaper poll last month saying they opposed it, compared with 39 per cent who said they were in favour. Japan's opposition parties are also calling for the tax hike to be shelved.

 
 

Mr Abe's government has tried to soften the blow by saying part of the revenue has been earmarked to subsidise pre-school education and childcare - a promise the LDP may be reluctant to revoke.

The party, which has controlled the government for all but four years since 1955, also vowed to step up efforts to change the country's seven decade-old pacifist Constitution, and help manage Japan's ageing and shrinking population.

Kyodo News reported on the platform earlier on Friday, saying it would also include measures to bolster regional economies and protect against natural disasters.