財政再建新目標 消費税引き上げから逃げるな

The Yomiuri Shimbun(Jun. 14, 2009)
Consumption tax hike is elephant in the room
財政再建新目標 消費税引き上げから逃げるな(6月14日付・読売社説)

Japan's serious fiscal deficits are in the spotlight again.

A new target for fiscal reconstruction was included in a draft of basic policies for economic and fiscal reform in 2009.

The pillar of the new target is achieving a surplus in the primary balance at both central and local government levels by the end of fiscal 2019, according to the draft of the government's annual fiscal policy guidelines.

The government earlier said it would try to attain the goal during fiscal 2011. But as the deficit in the primary balance likely will have swollen to about 40 trillion yen by the end of fiscal 2009, mainly due to repeated implementation of fiscal stimulus measures, the government has been forced to put off the target year for realizing the goal to fiscal 2019.

An official estimate showed that it would be impossible to achieve a surplus in the primary balance on the back of a yearly economic growth rate of 1 to 2 percent or by resorting to conventional methods of reining in government spending. This means, according to the estimate, that the government needs to hike the consumption tax to 12 percent from the current 5 percent by raising the rate by a total of seven percentage points--one percentage point every year from fiscal 2011--to accomplish its goal.

Another estimate showed that if the rate is raised by only five percentage points, to 10 percent, the government will have to wait until fiscal 2021 to see its goal achieved.

Although these are estimates, in the face of such a stern reality, neither the ruling nor the opposition parties can afford to put off any longer discussing the issue of raising the consumption tax rate.


Public debt skyrocketing

Under such critical national fiscal conditions, the government has no choice but to require the public to shoulder heavier burdens in the future.

In the fiscal 2009 main and supplementary budgets, the government set bond issuances totaling 44 trillion yen. This almost matches the amount of yearly tax revenues. The outstanding balance of national bonds will approach 600 trillion yen by the end of fiscal 2009.

Outstanding public debt at both national and local levels is about 170 percent of gross domestic product, far higher than the level in other advanced nations, such as United States and European countries, where it lies between 60 and 80 percent.

If this situation is left unresolved, it could cause a plunge in government bond prices and rising interest rates, shaking the foundations of the economy. It is a matter of course for the government to propose a new target for fiscal rehabilitation and work toward realizing it.


DPJ should face reality

The government and ruling parties should begin paving the way for raising the consumption tax rate soon if the economy recovers, while carefully watching the economic trends.

Meanwhile, if the main opposition Democratic Party of Japan touts itself as ready to take over the administration of the nation, it should realize anew the nation's harsh fiscal conditions and face head-on the issue of raising the consumption tax.

The consumption tax is increasingly seen not only as a means for fiscal reconstruction, but also as an indispensable financial resource to cover ballooning social security costs resulting from the declining birthrate and the growing population of elderly people.

The key to simultaneously undertaking fiscal reconstruction and reinforcing the social security framework lies in the consumption tax. The public should keep in mind the fact that a hike in the consumption tax will stabilize their livelihood.

(From The Yomiuri Shimbun, June 14, 2009)
(2009年6月14日01時41分 読売新聞)

by kiyoshimat | 2009-06-15 07:10 | 英字新聞

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