Japanese parliament agrees to double consumption tax

Published on 11/08/2012 00:00

Japan’s parliament passed a bill yesterday to double the country’s consumption tax over the next three years as opposition parties increased their pressure on prime minister Yoshihiko Noda to call fresh elections to prove he still has the public’s support.

Mr Noda, who is struggling in the polls after just 11 months in office, has said he was willing to stake his career on getting the tax hike passed – and even promised opposition lawmakers he would call elections soon so they would back it.

The hike and a package of related legislation were approved in the upper house of parliament by a fragile coalition of Mr Noda’s ruling party and two of its main rivals. Both are now calling for snap elections to be held as soon as next month.

Mr Noda and other supporters say the tax increase, from 5 to 10 per cent, will boost government revenues as Japan tries to deal with its swollen national debt, which is the largest in the developed world.

They also say the package will shore up Japan’s social security system, which faces growing strains as the nation is rapidly aging.

Mr Noda said supporting the tax hike was a painful political decision, but that it was an unavoidable measure Japan must take to secure its future economic stability. He added that the debt crisis in Europe has shown what happens when a country loses its financial credibility, and said Japan should not allow that to happen.

“We have reached a point where we must urgently secure revenues for our social welfare system,” Mr Noda said. “Someone must bear the burden for this growing cost.”