Japanese Prime Minister Shinzo Abe speaks during a press conference at his office in Tokyo on October 1, 2013. Japan's prime minister vowed October 1 to press ahead with a sales tax hike seen as crucial to shrinking a huge national debt, although critics fear it would derail a budding economic recovery. 
Japanese Prime Minister Shinzo Abe speaks during a press conference at his office in Tokyo on October 1, 2013. Japan's prime minister vowed October 1 to press ahead with a sales tax hike seen as crucial to shrinking a huge national debt, although critics fear it would derail a budding economic recovery.  - 
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Japan's Prime Minister Shinzo Abe announced a sharp increase to the country's national sales tax, from 5 percent  to 8 percent, in an effort to curb its high debt.  The change would go into effect next year.

The BBC's Rupert Wingfield-Hayes says Japan's population is aging very rapidly, and that is a driving force behind the tax hike. Japan has the largest public debt in the developed world. 

"Taxes currently only cover about half of government spending every year," says Wingfield-Hayes. "So something has got to be done to try and get Japan's public finances back in order."

He says the huge risk with this decision is that Japan's younger shoppers will stop spending, especially on big ticket items -- which could cause a drag on consumer spending.

The BBC's Rupert Wingfield-Hayes joins Marketplace's Mark Garrison from Japan to discuss. Click on the audio player above to hear more. 

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