Japan Consumption Tax hike at risk

Japan’s struggling economy and political uncertainty is threatening to delay again the planned rise in Consumption Tax from 8% to 10% on 1 October 2019.

The rise has already been delayed twice since 2015. This followed an initial rise from 5% to 8% in 2014 which contributed to the economy tipping into recession. The two-stage rise is aimed at helping to fund the spiralling social costs of an ageing population and a national debt over 200% of GDP.

The shockwaves of the US – China trade disputes have been impacting the export-led Japanese economy. If this continues, and indeed escalated, there may have to be a rethink of the planned rise in the indirect tax. The government described the world’s third-largest economy as “recovering at a moderate pace, while weakness in exports and industrial production continues.”. A government index measuring current economic conditions showed Japan may already be in recession, while first-quarter gross domestic product (GDP) data showed weakness in consumption and capital expenditure.