Prime Minister Shinzo Abe announced his decision to raise the consumption tax on Oct. 1, 2019 from the current 8 percent to 10 percent as planned, in an extraordinary Cabinet meeting on Monday afternoon, in a bid to strengthen the government's fiscal health and establish the nation's social security system for all generations.
At the meeting, Abe unveiled measures to mitigate the blow of the tax raise, including creating a system to allow small and midsized retailers to refund part of the purchases to customers in the form of reward points.
The government will also introduce the reduced tax rate of 8 percent -- the current rate -- for such goods as food and beverages, and taxation and budgetary measures for those who purchase large consumer durables, including automobiles and homes, from Oct. 1, 2019.
People will eventually receive benefits from about half of the additional revenue from the tax hike, according to the prime minister.
In the fiscal 2019 and 2020 budgets, the government will take special and extraordinary measures related to the consumption tax increase, he said, in an effort to level off its economic impact. Preschool education -- for both authorized and unauthorized facilities -- will become free-of-charge from Oct. 1, 2019, he said.
The consumption tax rate was increased from 5 percent to 8 percent in April 2014, and was scheduled to be further raised to 10 percent in October 2015. However, Abe postponed the further rate hike, saying the tax increase had harmed personal consumption.
Abe's latest decision comes as the nation's aging society increasingly requires the government to secure funds to establish a more sustainable social security system.
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