Japan's Kan Backs Consumption Tax Hike Proposal

Japan's outstanding public debt stands at 862 trillion yen 1.8 times the gross domestic product while "strong state finances is essential for both growth and social security."

Japan's new Prime Minister Naoto Kan said on Monday that the government is considering a proposal to raise the consumption tax in an effort to slash huge public debt, but added that it may take two years or more before the government lifts the nation's 5 percent consumption tax rate, Xinhua reported.

As Japan's outstanding public debt stands at the highest level among industrialized countries of 862 trillion yen 1.8 times the gross domestic product, fiscal rehabilitation through tax increases is considered inevitable.

"It's not necessary to mention the example of Greece but when fiscal collapse occurs, the livelihoods of many people go bust and the social security system collapses," Kan told a news conference, "In that sense, it goes without saying that strong state finances is essential for both growth and social security."

In the meantime, the government will also consider a system that would reduce the burden of higher consumption taxes on lower-income households, for example, lowing levies or providing tax refunds on the purchase of goods seen as necessities, he said.