Prime Minister Shinzo Abe is poised to raise Japan’s sales tax, but this bruising political decision leaves unresolved the bigger and much more complicated task of curbing runaway social-welfare spending.
The tax hike, Japan’s first serious move in nearly two decades to rein in the worst debt burden in the developed world, looks like the easy part.
Attention has focused on the sales tax increase – still not formally decided – which is hugely politically sensitive in Japan after the last rise, in 1997, was widely blamed for tipping the economy into recession.
But any improvement in government revenue from the tax increase will be dwarfed by expenditures, where a rapidly aging society and generous public services are blowing an ever-bigger hole in the budget.
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