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IMF Recommends Japan Triple Consumption Tax

IMF Recommends Japan Triple Consumption Tax

Naoyuki Shinohara, IMF deputy managing director (Asahi Shimbun)

The International Monetary Fund said Japan should triple its consumption tax in order to cut the country’s massive public debt.

At 5 percent, Japan’s consumption tax rate is one of the lowest in the world.

Anoop Singh, IMF chief for Asia, said “It has been our sense… that raising the consumption tax gradually, not immediately, beyond 2015 to say 15 percent, could be more in line with the tax rate in other countries.”

According to a 2010 CIA estimate, Japan’s public debt is 197.5 percent of the GDP–second only to fiscally irresponsible Zimbabwe. According to an IMF estimate, Japan’s public debt is 220 percent of GDP–by far the highest in the world.

Singh said: “In some way (increasing) the consumption tax is the most appealing measure to take. It is more growth-friendly and less distortive than other options.

“That, along with other reforms in social security and other spending, as a package, would then bring the debt ratio down.”

Since the collapse of the bubble economy in 1990, Tokyo has barely kept the economy afloat through massive pork-barrel spending–namely white elephant public works projects consisting of pouring concrete all over the country.

Prime Minister Yoshihiko Noda, a fiscal conservative, has already proposed doubling the tax to 10 percent, but has predictably encountered formidable public and political opposition.

Naoyuki Shinohara, IMF deputy managing director, praised Noda’s decision to raise the consumption tax, but said 10 percent won’t be enough.

“While the IMF welcomes the proposal, there will come a need for an even further increase in the future,” Shinohara said in an interview with the Asahi Shimbun.

One thing should be clear: paving over the entire country in the name of creating jobs is no longer a viable economic strategy.



Dustin Dye

Dustin Dye is the author of the YAKUZA DYNASTY series, available through the Amazon Kindle.

He lived in Okayama, Japan, where he taught English at a junior high school through the Japan Exchange and Teaching Program for three years. He is a graduate from the University of Kansas, where he received a bachelor's degree in anthropology.

His interest in Japan began in elementary school after seeing Godzilla fight Ghidorah, the three-headed monster. But it wasn't until he discovered Akira Kurosawa's films through their spaghetti Western remakes that he truly became fascinated in the people and culture of Japan.

He lives in Kansas with his wife, daughter and guinea pig.

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E-mail him: [email protected]