Japanese Prime Minister Shinzo Abe announced today that the Japanese government is planning on increasing the current sales tax from 8% to 10%. The main purpose of this increase is to funnel additional money into Japan’s healthcare infrastructure in order to care for the rapidly increasing elderly population.
Concerns have been raised that the hike will reduce consumer spending and, by extension, stifle the country’s economic growth. In an effort to prevent this, the country is planning for tax breaks for durable goods purchases like cars and hopes, as well as an unspecified means of easing the burden on small companies. Food and beverage items will also not be subject to the tax hike, though this presents the potentially hazardous side-effect of requiring certain businesses to manage multiple tax rates.
Part of the revenue generated from the hike will be used to subsidize education costs, as well as to offset a recent budget increase on the post-earthquake reconstruction efforts in Hokkaido.