By APD writer Alice

Japan raised its consumption tax rate to 10 percent from 8 percent on October 1, after twice being delayed, as the government is struggling to cover ballooning social security costs stemming from the country's aging population and falling birthrate.

Japanese Prime Minister Shinzo Abe told reporters at his office that the latest consumption tax hike is a big step forward in pushing ahead with social security reforms. We will closely monitor the effect of the consumption tax increase and take all possible measures to alleviate.

Nearly half of the 5.7 trillion yen ($52.8 billion) additional annual revenue expected from the tax hike will be used to improve welfare programs, centering on free preschool education that started the same day.

But the first tax hike in five years caused confusion among retailers and consumers as items such as food deemed necessary in daily lives are exempted from the change under the government's scheme aimed at minimizing its potential negative impact on spending. As a result, different rates have been introduced.

The second round of the two-stage consumption tax increase was originally scheduled for October 2015 following the first stage from 5 percent to 8 percent in April 2014.

(ASIA PACIFIC DAILY)