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Cabinet Decisions and Other Announcements

Consumption Tax Increase and Related Measures (Remarks by the Prime Minister at the Extraordinary Cabinet Meeting)

October 15, 2018

[Provisional Translation]
The consumption tax rate is scheduled to be increased by 2% from the current 8% to 10% on October 1, 2019 as stipulated by law.
As a result of promoting Abenomics for five and a half years, the economy grew by 12.2% even as the working-age population declined by 4.5 million people. In addition, employment increased by 2.5 million jobs, and the number of people in regular employment rose by 780,000.
Now is the time to address head on the national crisis of a declining birthrate and aging population. We will make a major shift towards a social security system oriented to all generations, which will bring peace of mind and security to both the elderly and young people. At the same time, we will make decisive progress towards fiscal consolidation.
Based on our previous experience with the 3% consumption tax increase, we will mobilize a range of measures and make every effort to ensure that the 2% increase does not affect the economy.
First, the revenue from the consumption tax increase will be directed to different uses. Half of the tax revenue from the 2% increase will be channeled back to the people. Starting on October 1 of next year, early childhood education will be free at both authorized and non-authorized facilities.
Secondly, a reduced tax rate will be introduced. The 8% consumption tax will be maintained for foods and drinks, which account for one-fourth of household consumption. I would like to ask Cabinet members to make sure that all possible preparations are undertaken towards the implementation of the reduced tax rate.
Thirdly, adequate support measures will be taken so as to level consumption before and after the tax increase. Supports utilizing new approaches such as point reward will be extended to small and medium-sized retail businesses for a limited time only after the consumption tax increase. Furthermore, we will take steady steps to vitalize shopping streets.
To let consumers make purchases before and after the consumption tax increase with peace of mind, a guideline will be developed to allow for flexibly setting prices before and after the consumption tax increase. Needless to say we will also take measures to allow small and medium-sized enterprises (SMEs) to smoothly shift the consumption tax to their clients.
Fourthly, regarding large consumer durables of which the burdens of the tax increase are felt large, tax and budgetary measures will be taken to provide merits for purchases made after October 1, 2019.
With regard to automobiles, I ask the party to carry out deliberations over the reduction of the tax burden from owning cars purchased after October 1, 2019 so as to reach a conclusion by the end of this year. Similarly, we will prepare measures to provide merits for housing purchases made after October 1, 2019.
In addition to these measures, we will further step up our emergency measures for disaster prevention, disaster mitigation, and national resilience, which are posing concerns among the people.
Provisional and special measures will be introduced to address the consumption tax increase in the FY2019 and FY2020 budgets. We will formulate budgets of a scale that assures the leveling of the economic impacts caused by the consumption tax increase.

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