Japanese Prime Minister Shinzo Abe said Oct. 15 that the government will push through with its plan to raise the national sales tax next October to 10% from 8%, Reuters reported.
Abe said the government will consider tax breaks for durable goods purchases such as cars and homes while food and beverages will be exempted from the tax hike. The government will also come up with a scheme to ease the burden on small companies and retailers.
The government will need the extra revenue to pay for healthcare costs for its ageing population. Half of the revenue to be generated from the tax increase will be used to subsidize education costs, said Abe.
"We have to face the problems caused by our ageing society and build a welfare system that is fiscally sound," he said, Reuters reported.
The slightest increase in tax rates can have a deep impact on Japan's households. The last tax increase, to 8% from 5% in 2014, hit private consumption, which accounts for 60% of Japan's economy.
"This tax hike is only 2 percentage points, but we have to use our experience from the previous tax hike and make every effort to ease the impact on the economy," said Abe.
Abe, who is now in his final three-year term in office, has twice postponed the tax increase since the last tax hike in 2014.