Japan must raise its sales tax beginning with 2014, if it wants to keep under a control the public debt, which is set to increase further from this year’s level of 214 percent of GDP to 223 percent next year.
The conclusion was stated in a report by the Organization for Economic Cooperation and Development, based in Paris, France.
Japan’s public finances are pushed further into uncharted territory, OECD said, so raising the sales tax from 5 to 10 percent by 2015, according to prime minister Yoshihiko Noda’s plan, is a “top priority”, while balancing the budget and reducing the public debt is “essential”, according to the organization.
The alternative to these measures is that the government would have to increase its borrowing costs, the report said.
Japan was recently criticized by the chief of the Organisation for Economic Cooperation and Development (OECD) for how it is running its economy. The country needs a bigger “sense of crisis”, said Angel Gurria, the secretary general of the OECD, an organisation of the richest countries in the world.