Tokyo, April 1: Japan Tuesday raised its sales tax rate from 5 percent to 8 percent, marking the first sales tax hike in 17 years, reported Xinhua.
The move by Prime Minister Shinzo Abe would affect Japan’s economy that has showed signs of recovery brought by Abe’s economic policies.
The first step of the two-stage tax hike is aimed at covering swelling social security costs for the country’s aging society, which would help increase government tax revenues and restore the nation’s fiscal health.
Abe said after the tax hike Tuesday, the government will take necessary measures to support the economy after the first step of consumption tax rate increase.
“We cannot overlook an opportunity of breaking away from deflation,” the prime minister told reporters at his official residence. “We will take necessary measures in consideration of people’s lives.”
The government estimates that the tax revenue generated by the consumption tax hike in fiscal 2014 will be about $48.44 billion.
Abe has said that he will decide by the end of the year whether to carry out the second step of increasing the consumption tax from 8 percent to 10 percent after assessing economic conditions.