Mr. Itoh said he was intrigued by the French economist’s conclusion that large government debts can only be reduced through fiscal austerity, inflation, or a tax on wealth, preferably the last of those.
“Maybe we need a combination of the three,” Mr. Itoh said. “Fiscal austerity is very important, of course, but that is not enough to deal with this huge amount of the debt. We need some kind of inflation, not hyperinflation, but there’s a lot of debate in the future whether 2% is enough. It’s very controversial. And third is wealth taxation. It is not the discussion for now, but eventually in the future we have to think about what kind of balance we want.”
Mr. Itoh said taxes on wealth and property hadn’t received much attention in Japan, because much of the discussion on measures to raise revenue has focused on a planned second increase in the consumption tax, which Prime Minister Abe last year decided to delay until 2017. But that may be set to change.
“Probably that discussion will attract more attention in the near future,” Mr. Itoh said. “We actually started discussing what are the pros and cons of that type of taxation.”
Projections released Wednesday showed the government will face an uphill battle in its bid to put its fiscal house in order as the country’s working-age population dwindles, while the number of elderly in need of public care steadily increases. Some fresh thinking on how to increase government revenues may be in order