Japan may consider consumption tax hike

13:46, March 25, 2010      

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Prime Minister Yukio Hatoyama said Thursday that he is considering setting up talks on the possibility of hiking Japan's consumption tax, which currently stands at 5 percent, in order to fund his party's welfare spending plans and other fiscal burdens facing the country.

The prime minister has promised that his party would not raise the tax during its term in office, which is set to last through 2013, but instead focus on eliminating wasteful spending.

"I would like to hold active discussions on the consumption tax to make sure that (future) social security costs are covered," Hatoyama said in parliament.

Hatoyama's Democratic Party of Japan (DPJ) has looked to focus the way public money is spent away from major projects such as new highways and dams that it considers wasteful, and into social welfare programs.

A bill that will provide free education to high school age students and offer money to help parents raising younger children is expected to be passed in the upper house on Friday. The bill is a part of a budget put together by the DPJ worth 1 trillion yen ( 10.85 billion dollars), financed in part by a 490 billion yen (5. 32 billion dollar) national debt.

The consumption tax in Japan was put in place in 1989 and remains unpopular with the Japanese public. In recent years, however, as the national debt has grown, consideration of raising the tax has been discussed more often by politicians.

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