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A long-delayed increase in Japan’s consumption tax will now
go into effect in October 2019, as affirmed by Japanese Prime Minister Shinzo
Abe to parliament on March 28, 2018. Abe remarked that the planned increase — from
8% to 10% — would not be affected by economic conditions between now and
October of next year.
Economists have long told Japan that consumption taxes must
rise in order to help bring down the country’s very large public sector debt. An
initial increase from 5% to 8% went into effect in April 2014 and was blamed
for an immediate decline in Japan’s economy. The next increase, from 8% to 10%,
was originally scheduled for October 2015, but concern about possible economic
impacts forced the government to impose a delay until April of 2017. Abe then
delayed that increase by another 30 months in June 2016, citing increasing
uncertainty in the global economy.
Despite Abe’s remarks, it is of course possible that the
increase will again be delayed at some point between now and October 2019, however,
Worldwide ERC® members doing business in Japan should begin to plan for
increased costs on the assumption that the increase will in fact go into
effect. The change would also increase expatriate costs, which are already high