Oct. 1 - Japan's Prime Minister Shinzo Abe will take a step that none of his predecessors has tried in more than 15 years - making a dent in the government's runaway debt by increasing sales tax from 5% to 8% in April. Joanna Partridge reports
His policies have helped to turn around the world's third-largest economy. Now Japan's Prime Minister Shinzo Abe has taken the first real step in 15 years towards tackling the government's runaway debt. As the domestic economy returns to life, the popular PM will increase national sales tax from 5 to 8 percent next April. SOUNDBITE: JAPANESE PRIME MINISTER, SHINZO ABE, SAYING (Japanese): "Given the situation, we need to push forward bold reforms decisively and make this recovery a more solid one in order that we can achieve our dual goals of economic recovery and fiscal integrity." The tax hike is part of a package agreed by the previous government and current ruling parties. It's just the first step towards a two-year goal of doubling the consumption tax - which is similar to a goods and service tax in other countries. The increase is expected to raise an extra 8 trillion yen - 81 billion dollars - a year. Wary of damaging the fragile recovery Abe's also announced a $51 billion stimulus package to help the economy cope and recovery from the last year's tsunami. Japan's manufacturers are feeling more positive. Sentiment rose close to a six-year high in the third quarter, big companies are planning to increase capital spending and exports are picking up. Speaking at Japan's biggest electronics expo, Sony's CEO welcomed the hike. SOUNDBITE: SONY CORP CEO, KAZUO HIRAI, SAYING (Japanese): "I think that the Japanese economy is overall on an upward path and so when you think about Japan's future, I think it was good to decide to increase the tax rate at this point." The economy may be looking up - but it'll take time for Japan to reduce its mountain of debt, which recently topped 10 trillion dollars. Japan has the dubious honour of the heaviest debt load in the industrialised world at more than twice the size of the economy.