Japan pledges to double sales tax

Japanese Prime Minister Naoto Kan’s government modified a pledge to double the nation’s 5 percent sales tax by 2015 after some ruling party members said a specific deadline shouldn’t be set.

The government will raise the levy to 10 percent by the “middle” of this decade, according to a statement released in Tokyo today. Economic and Fiscal Policy Minister Kaoru Yosano said the increase would be completed between 2014-2016.

Kan’s ability to restore the fiscal health of a nation with the world’s largest debt burden has been hampered by lawmakers calling on him to resign and a record earthquake. A doubling of the sales tax would still be below the 15 percent the International Monetary Fund has recommended for the world’s third-largest economy.

“Division between the Cabinet and the Democratic Party of Japan makes it much harder for the government to raise taxes and fix the nation’s finances,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management Co. in Tokyo.

Yosano and Finance Minister Yoshihiko Noda stepped up their calls last week for the tax to be raised by 2015 as proposed by a panel headed by the premier. The extra revenue would be used to fund the nation’s rising welfare cost amid an aging population. DPJ lawmaker Yoichi Kaneko was among those opposing the panel’s recommendations, saying an “unconditional” increase by 2015 would be “unacceptable.”

“Everyone knows Japan’s fiscal state will be in danger if the sales tax isn’t raised,” Yosano said at a press conference in Tokyo today. He said the government remains committed to improving the nation’s fiscal health.