TOKYO(Kyodo) -- The chief of the Organization for Economic Cooperation and Development suggested Wednesday that Japan raise the consumption tax from the current 8 percent to "at least 15 percent" in the future.
Speaking to reporters after a meeting in Tokyo with Prime Minister Shinzo Abe and other senior government officials, Secretary General Angel Gurria cited Japan's high level of public debt against gross domestic product and a low sales tax rate compared with other developed countries as the reason for urging the rate increase.
Gurria said he suggested that Japan raise the consumption tax to 10 percent as scheduled in April next year unless there is a major economic shock on the scale of the 2008 collapse of U.S. investment bank Lehman Brothers or a major natural disaster.
The meeting, which also involved Shang-Jin Wei, chief economist of the Asian Development Bank, was the fifth in a series of hearings by Abe of foreign economists as part of preparations for a Group of Seven summit he will host in May.
Among the previous attendees, Paul Krugman and Joseph Stiglitz, both winners of the Nobel Prize in economics, suggested Japan forgo the planned tax hike, fueling speculation that they were invited because Abe may be laying the groundwork for a delay.
Abe has said recently that raising the levy would be meaningless if it ended up reducing tax revenues.
On Wednesday, Gurria, a former Mexican finance minister, advocated raising the consumption tax rate to "at least 15 percent" in the future because "10 percent is not enough."
"I believe this is an intergenerational issue," he said. "This is about the future generations when you have debt to GDP of 230 percent."
Gurria also pointed to the average of value-added tax of OECD member states standing at 20 percent, and that Japan has more room to increase the consumption tax rate above 10 percent to pursue fiscal sustainability.
But Gurria said Japan should raise the tax in a gradual way, such as by 1 percentage point per year, so as to minimize the tax hike's potentially negative impact on the consumption patterns of people.
At the meeting, the start of which was open to the media, Abe said, "I would like to discuss with world leaders how Japan can contribute to achieving sustained and robust growth in the world economy" at the May 26-27 summit in Mie Prefecture, central Japan.
Policy coordination in promoting world economic growth and stabilizing financial markets will top the agenda at the Ise-Shima summit, which will bring together the leaders of Britain, Canada, France, Germany, Italy, Japan and the United States.