IMF: Japan’s national debt to hit 250% of GDP in 2015

May 14, 2010
By Ken Worsley

A report released today by the International Monetary Fund asserts that Japan’s government debt will reach 250% of GDP in 2015. The IMF suggests that Japan increase its consumption tax by 5% as a step towards reducing its public debt.
Of course, consumption tax hikes tend to spell political disaster in Japan, as Prime Minister Noboru Takeshita learned after introducing the consumption tax in 1989 and PM Ryutaro Hashimoto discovered after raising the tax to 5% in 1997. While both the former and current ruling parties have acknowledged that consumption taxes need to be increased, neither party has shown a willingness to say so in their election manifestos.

Until now. Today it was reported that a DPJ joint election panel agreed to include language promising to increase consumption taxes as part of the DPJ’s Upper House campaign. However, it was also agreed that the tax should not be raised until after the next Lower House election, which would be as far away as 2013. And there was no discussion of just how much the tax should be increased.
If that seems vague, the leading opposition party’s stance is not much better. The LDP has called for an increase in consumption taxes in its election manifesto, but does not say when or by how much.