Japan's ruling party, the Democratic Party of Japan (DPJ), has agreed to postpone a sales tax increase amid growing opposition against the move.A DPJ panel has agreed to delay raising the tax to 8% until April 2014, with a further increase due in October 2015.The 8% tax level was due to come into force by April 2013.Prime Minister Yoshihiko Noda has been seeking to double the sales tax from current 5% to improve the country's finances, amid growing debt levels.Japan, the world's third-largest economy, has the highest public debt to gdp ratio among the world's developed economies.
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“Start Quote We are now in a spending oriented economy without a meaningful tax reform policy”Martin Schulz Fujitsu Research Institute
The delay in tax increase comes just days after Japan unveiled a 90.3tn yen ($1.2tn; £742bn) draft budget plan for the financial year running from April 2012 to April 2013.Japan has been facing an increased pressure on its finances as it continues to rebuild its infrastructure and economy after the earthquake and tsunami in March.
According to the Cabinet office, the twin disasters are estimated to cost it between $198bn (£127bn) and $309bn.Analysts said the delay in the tax increase was likely to put pressure on Japan's already-stretched finances."We are now in a spending-oriented economy without a meaningful tax reform policy," Martin Schulz of Fujitsu Research Institute told the BBC."The tax increase would have counterbalanced the budget that the government have drafted," he added.