Japan’s Prime Minister Shinzo Abe has announced an increase in sales tax for April next year. The move is seen as crucial to rein in the country’s spiraling debt and comes as business confidence recovers.
Sales tax in Japan will rise from a current 5 percent to 8 percent in April 2014, Japanese Prime Minister Shinzo Abe announced Tuesday.
The hike was needed to help reduce the nation's public debt and cover its mounting social security costs as the country's elderly population expanded, Abe told a policy meeting of his ruling Liberal Democratic Party.
On Tuesday, Abe's cabinet was also expected to approve tax breaks and other stimulus measures to bolster potential negative effects from the tax hike.
Business confidence recovers
The Japanese prime minister's decision came after an important survey showing rising business confidence in the world's third-largest economy.
Bank of Japan's closely-watched Tankan report released Tuesday, showed sentiment within Japan's manufacturing industry rising for the third straight quarter as exports grew and the national currency remained at a low level.
The tankan manufacturing index surged to its highest level in six years, standing at 12 points in September. Confidence among non-manufacturing sectors, as well as medium-seized and small business also grew.
The recovery from a recession in Japan since the end of last year is widely attributed to a change of economic policy after Shinzo Abe took power following a general election in December.
Abe has sought to overcome years of sluggish grow with a combination of ultra-lose monetary policy and big government spending. In addition, he has promised social security reforms and industry deregulation.
Between April and June, Japan's economy grew 3.8 percent.
uhe/ipj (AP, dpa, AFP)