Japan poised to push ahead with sales tax hike

The Japanese government is poised to raise the country's sales tax to 8 percent in April next year as the economy has shown continuous sign of recovery, local media reported on Thursday. Prime Minister Shinzo Abe has made the decision of the widely- expected tax hike after a meeting Tuesday with his key cabinet members and policy advisors, Kyodo News said, citing an unnamed source. The proposed sales tax hike from the current 5 percent to 8 percent has been considered a key measure to increase the revenue of the Japanese government, which has the highest debt burden among developed countries, with public debt at more than 200 percent of its gross domestic product. Analysts said a series of upbeat data released recently pointed to a stronger recovery of the world's second largest economy, which strengthened the case for the tax hike as scheduled. The optimism got a further boost over the weekend from Japan's successful bid to host the 2020 Summer Olympics. In order to prevent the tax hike from hurting the recovery, the Abe administration also decided to implement a stimulus package worth 5 trillion yen (50 billion U.S. dollars), according to Kyodo. Abe was expected to formally announce the plan on October 1 at the earliest, but it remained unclear whether the rate would be further raised to 10 percent by late 2005 as previously expected by global investors. However, a senior government official denied that Abe had made up his mind. "The prime minister will decide early next month," Chief Cabinet Secretary Yoshihide Suga told a Tokyo news briefing.