The Democratic Party of Japan (DPJ) proposed a tax increase worth of Y9.2 trillion ($120 billion) to support the reconstruction of the country after the natural disasters which hit this spring.
The tax increase is temporary, but it spans during several years. Corporate taxes would be raised next April for three years, while income taxes would rise in January 2013, for 10 years. Tobacco taxation would also go up, next October.
“We need to explain sincerely to the public that tax increases are needed to support reconstruction,” Seiji Maehara, the policy chief of the DPJ, said. “These are temporary measures. We want to avoid a negative impact on the economy.”
To raise enough money for the rebuilding, the DPJ also intends to sell the state’s stake of just over 50 percent in Japan Tobacco Inc. The ruling party has confirmed that a third stimulus package, worth of Y12 trillion, has been agreed on.
Now the government ruled by Yoshihiko Noda has to discuss with the opposition to pass the new measures.
The government intends to spend about Y19 trillion during the next five years to rebuild the country. It has already approved two financial packages worth of about Y6 trillion in total, but Japan is in the meantime struggling with an economy that has shrunk for three consecutive quarters.