Gemba Says Japan to Seek Change in Consumption Tax Law by March 2012

Japan’s National Strategy Minister Koichiro Gemba said the government will introduce legislation authorizing a change in the national sales tax by March 2012, and that raising it is contingent on the state of the economy.

“We’ll decide the timing of raising the consumption tax by watching the economic trend, so naturally the timing will be after the next general election,” Gemba told reporters today at the Foreign Correspondents’ Club of Japan in Tokyo.

Prime Minister Naoto Kan this month called for a national debate on raising the five percent tax to sustain the rising social welfare costs of an aging nation. His Democratic Party of Japan came to power in 2009 promising not to raise the levy until the next election for the lower house of parliament, which must be called by October 2013.

Kan is working to boost an economy threatened by persistent falling prices, a strong yen and the world’s largest public debt. Economic growth may have contracted last quarter as stimulus measures expired. Gemba said the government “must first beat deflation in 2011” before any increase in the sale tax.

To contact the reporter on this story: Sachiko Sakamaki in Tokyo at ssakamaki1@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg in Hong Kong at phirschberg@bloomberg.net

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