Japan PM rules out sales tax hike to fund families, defence

JAPANESE Prime Minister Fumio Kishida said he has no intention for now to raise the sales tax as his government sets off on a plan to boost military spending and provide financial incentives to help reverse a falling birthrate.

Kishida also said in a group interview with reporters on Thursday (Apr 20) it was important for the world that the US and China keep their ties stable.

Kishida has said the period to 2030 is the “last chance” to reverse a declining birthrate that threatens Japan’s long-term economic prospects, as he vowed to double spending on efforts to head off falls in the birthrate.

When asked about how he could fund some of these programmes, Kishida said: “We have to carefully proceed with discussions regarding the funding as well, but as to your question about sales tax, we are not thinking of touching it for the time being.”

The government has yet to clarify how it will fund ramped up spending on defence amid heightened tensions over regional security amplified by Russia’s war in Ukraine.

While Japan’s sales tax at a maximum of 10 per cent is relatively low by international standards, raising it has typically upended the economy, making the ruling coalition reluctant to resort to further increases.

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So far government figures for how part of the extra spending for defense will be funded have relied on reserve funds, generating concern about the sustainability of the increased budgeting.

Kishida also said the health of the global economy relied on steady relations between the US and China. ‘“For our country and for international society, it is important that US-China relations be stable,” he said.

The US has been pushing its allies and partners to coordinate against economic coercion, not just military threats, from the likes of China as Japan hosts a variety of G7 events, including a summit of leaders in Hiroshima next month. BLOOMBERG