Shinzo Abe’s Latest Economic Dilemma

Japan has faced troubling economic times over the last few years.

The recession affected majority of the world but the natural disasters that occurred in Japan has sent the nation down a spiralling hole of debt. Prime Minister Shinzo Abe has been credited for aiding the economy into a slow start to recovery, but his task is far from over.

Named Abenomics, the prime minister’s economic plan now faces a new obstacle that needs to be tackled in the upcoming months. In order to plug a hole into the nations increasing deficit, the Japanese government is contemplating an increase in

sales tax to be implemented by April 2014.

The decision will be made before the Asia-Pacific Economic Cooperation conference in Indonesia on October 7th.

The plan to increase the sales-tax takes part in two steps. The first includes raising the tax from 5% to 8% by April next year, and the second step involves further increasing it to 10% by October 2015.

Three Possible Outcomes

Abe has gathered a panel consisting of high ranking finance authorities of the nation such as the Minister of Finance and the Governor of the Bank of Japan. These experts will deliberate whether Japan’s economy is stable enough to withstand this increase in sales-tax.

The first possible outcome is that the economy is indeed ready for the increase and by April next year Japan will see a 3% increase in sales-tax.

The second possible outcome is that the tax changes are until the economy has stabilized in order to reduce the risk of negative outcomes.

The final possibility is that the tax changes are ruled out indefinitely. This however, is highly unlikely considering the magnitude of the debt problem that Japan is currently facing.

As of June 30 the nation’s debt increased by 1.7% since the end of March.

Japan’s total debt is currently $10.46 trillion which is equivalent to over 2 times the worth of the nation’s economy.

If a sales-tax is not implemented in the near future, Japan’s economy is not likely to improve but decline further.

Studies from across the nation show that the majority of the population are in favour of the sales-tax increase, however they are hoping that the decision is not rushed and that the economy will be able to withstand the change.

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