Japanese gov't set to shelve consumption tax hike idea: Yosano

TOKYO, Sept. 25 Kyodo - Japan is likely not to implement a consumption tax hike over the next three years now that Taro Aso has become president of the ruling Liberal Democratic
Party and the nation's prime minister, Economic and Fiscal Policy Minister
Kaoru Yosano said Thursday.
Yosano, who retained his portfolio in Aso's just-inaugurated Cabinet, also said
Japan's flagging economy will have to wait for a resurgence of overseas demand
for its recovery, admitting the government cannot depend on ''cautious''
Japanese consumers.
Aso has said the slowing economy will take three years before it starts to
expand again at cruising speed, and that he will not raise the consumption tax
from the current 5 percent during that period.
''Now that Mr. Aso, as the LDP president and the prime minister, has decided
not to raise the tax for the next three years, the party's study panel is
likely to go ahead with discussions of his policies,'' Yosano said in an
interview with Kyodo News and other media organizations.
Given swelling welfare costs as a result of the rapidly aging population, the
government of former Prime Minister Yasuo Fukuda compiled guidelines that
mention the need to undertake comprehensive tax reforms, including a higher
consumption tax, in order to secure stable revenues to meet the costs.
Aso has also pledged his government will try to ensure the recovery of Japan's
economy, which has been affected by the U.S. slowdown amid the global financial
crisis, indicating he would not adopt unpopular policies, including tax hikes,
in the run-up to a widely expected general election.
But Yosano, known as a keen advocate of fiscal reconstruction and higher taxes,
said he will strive to present Japanese citizens with a ''clear road map'' on
tax reforms.
''We will discuss drastic reforms later this year, and this 'drastic' means
every component, not only the consumption tax,'' he said. ''We cannot avoid
discussing the issue as a package...even as it takes much time.''
Yosano said the Japanese economy could recover only when overseas demand
regains its impetus.
''I don't believe that in one day Japanese citizens will suddenly stop saving
money and start spending it on consumables,'' he said. ''Japanese consumers are
very cautious. They never spend when the economic environment is not in a good
shape.''
''Ultimately, it will be resurging overseas demand that will pull the Japanese
economy back onto a recovery track,'' Yosano said.
==Kyodo