APD | Japan urged to raise consumption tax to 20% by 2050

By APD writer Alice

The International Monetary Fund (IMF) has urged Japan to double its consumption tax rate to 20 percent by 2050 to cover its increasing social security costs due to the rapidly aging population.

On October 1, the Japanese government officialy raised the rate from 8 percent to 10 percent after two times of delay.

IMF chief Kristalina Georgieva said at a recent press conference in Tokyo that the IMF believes that a gradual increase of the consumption tax can helpJapan achieve its goal of fiscal consolidation by 2025.

The organisation also called on Japan to extend a set of countermeasures to mitigate the negative impact on consumer spending from the October 1 tax hike, he said.

The IMF projected Japan's economy to grow by a real 0.8 percent this year and 0.5 percent in 2020.

The aging and depopulation of Japan could reduce the country's real gross domestic product by 25 percent in four decades under current policies, Georgieva said.

He also stressed the need for the implementation of structural reforms such as deregulation and labor market reforms, accompanied by accommodative monetary policy and efforts toward fiscal consolidation, saying they could help boost Japan’s real GDP by as much as 15 percent over the same period.

(ASIA PACIFIC DAILY)