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Lower House overwhelmingly approves new sales tax

Date Posted: 2012-06-28

It’s all over except the complaining, as the Diet’s Lower House rammed through a consumption tax favored by Prime Minister Yoshihiko Noda despite opposition from his ruling Democratic Party of Japan.

The tax bill called for increasing the sales tax from 5% to 8% in 2015, then jump to 10% in 2015. It passed 363-96, with support from the countries two major opposition parties. Some 57 DPJ members, including elder statesman Ichiro Ozawa and former Prime Minister Yukio Hatoyama, were against the bill and have threatened to leave the party as a result of it. The bill is expected to pass the Upper House to become law.

Prime Minister Noda’s been pushing the measure, arguing it’s a necessity to cut Japan’s growing national deficit, now more than double the gross domestic product. Noda pretty much staked his political career over getting the bill passed. “This reform is not just for our generation,” he said before the vote, “but for our future. Passage won’t solve the financial crisis, cutting the deficit only slightly. Still, the Cabinet Office predicts that revenues will increase by ¥13.5 trillion a year by 2015, trimming a deficit that averages ¥45 trillion each year.

Some fear the economy will suffer, as spending will further decline, putting pressure on exporters and the automotive industry. The overall economy’s stagnation has been overshadowed by the effects of last year’s massive earthquake and tsunami. Japanese say they’re willing to make sacrifices, but are still apprehensive about how the increased taxes will affect their personal finances.

If Ozawa and his colleagues carry through their threat to leave the DPJ and form an independent party, Noda could lose his parliamentary majority. That would force general elections and spell the end to Noda’s administration, which began only last September.

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