Japan is ready for its sales tax rise, Finance Minister Taro Aso says

  • Japan's economy is ready for the increase in its nationwide sales tax scheduled for October, Finance Minister Taro Aso said on Tuesday.
  • The tax will be increased to 10 percent in October from 8 percent currently.
  • Despite the measures, some economists and policymakers are concerned about the impact on the global supply chain of the ongoing trade war between China and the U.S.
Taro Aso, Japan's finance minister, speaks during a news conference following the Group of Seven (G-7) finance ministers and central bank governors meeting in Sendai, Japan, on Saturday, May 21, 2016.
Tomohiro Ohsumi | Bloomberg | Getty Images
Taro Aso, Japan's finance minister, speaks during a news conference following the Group of Seven (G-7) finance ministers and central bank governors meeting in Sendai, Japan, on Saturday, May 21, 2016.

Japan has taken sufficient measures to support the economy and a nationwide sales tax will go ahead as scheduled in October, Finance Minister Taro Aso said on Tuesday.

Aso said there was no change to the government's plan to raise the sales tax, baring a Lehman Brothers-type of crisis.

"The measures we have taken so far should be sufficient" to raise the sales tax, Aso told reporters after a Cabinet meeting.

"I expect Japan's recovery to continue because of the benefits of the policies we have already put in place."

Japan needs the extra tax revenue to pay for rising welfare costs, but there are growing concerns the tax hike could damage consumer spending amid signs the country's economic outlook will weaken this year due to slowing global growth.

He also expects Japan's economic recovery to continue given the policies the government has put in place that increase spending on infrastructure and subsidize education costs for low-income families.

Japan is scheduled to raise the nationwide sales tax to 10 percent in October from eight percent currently. To soften the blow to consumer spending, the government already plans to extend tax breaks and subsidies to households. Food and some daily necessities will be exempted from the tax hike. The government will also offer tax breaks for purchases of cars, homes and other durable goods.

In addition, the government will distribute shopping vouchers to some households and cash handouts to pensioners with low incomes.

The government also has a separate program to subsidize education costs and another package for infrastructure spending after a series of natural disasters last year.

Despite the measures, some economists and policymakers are concerned about the impact of U.S.-Sino tit-for-tat trade tariffs on the global supply chain, which have contributed to wild swings in financial markets.

Japan is particularly vulnerable to developments overseas because its manufacturers focus on making electronic parts and heavy machinery for export to China and other manufacturing centers abroad.