Japan ruling party lawmaker wants sales tax ditched as virus downs economy

TOKYO (Reuters) - Japan’s government should remove a 10% sales tax to revive an economy dragged down by the coronavirus pandemic, a ruling party lawmaker close to Economy Minister Yasutoshi Nishimura said on Thursday, expressing a view that may gain traction as the country’s recession deepens.

FILE PHOTO: Shoppers wearing protective masks choose clothes at Japan's supermarket group Aeon's shopping mall as the mall reopens amid the coronavirus disease (COVID-19) outbreak in Chiba, Japan May 28, 2020. REUTERS/Kim Kyung-Hoon/File Photo

Hiroshi Ando is among a group of junior Liberal Democratic Party (LDP) lawmakers proposing that Japan get rid of the sales tax and directly subsidise firms to prevent business closures.

Ando said the government’s decision to raise the sales tax rate to 10% from 8% last October was a “clear mistake” because the economy was already in a downturn by then.

“We need to revive the economy by pushing the sales tax rate back to zero,” he told Reuters on Thursday. “It’s absolutely essential that Japan eliminate the tax altogether.”

Prime Minister Shinzo Abe’s administration has rebuffed the idea of rolling back the sales tax.

But the rare direct rebuke from a ruling party lawmaker underscores a growing concern within the LDP over the damage the pandemic is inflicting on the economy and Abe’s popularity.

Support rate for Abe’s administration hit a record low 35.4% in a poll by broadcaster TBS released on Monday, reflecting people’s dissatisfaction over its handling of the pandemic.

When Ando’s group made the proposal in March, it had the ears of Abe, who told parliament he “took note of calls from junior LDP officials to take drastic action on the sales tax.”

“We’ll take sufficient action quickly as the pandemic would have a significant impact on the economy,” Abe added.

Abe had proceeded with a twice-delayed sales tax hike to 10% in October, arguing that the proceeds are crucial to pay for rising social welfare costs of a rapidly ageing population.

Reporting by Leika Kihara and Yoshifumi Takemoto; Editing by Simon Cameron-Moore