Prime Minister Shinzo Abe said Monday the Japanese government will raise the consumption tax to 10 percent from the current 8 percent in October next year as planned, after postponing the increase twice due to concerns it would dampen consumer spending and hurt the economy.

Confirming that the schedule remains unchanged in an extraordinary Cabinet meeting, Abe said he will make "all-out efforts and take all measures" to prevent the tax hike from having a negative impact on the economy, according to a summary of his remarks released by the government.

Although the 3 percentage-point consumption tax increase in 2014 was believed to have led to a brief recession in Japan, the government views another hike as being indispensable for financing increasing social security costs due to the rapidly graying population.

(A grocery store in Tokyo)
[File photo]

Japan's public debt, the biggest among advanced economies, stands at about 240 percent of its gross domestic product.

Abe, who secured another three-year term as head of the Liberal Democratic Party last month, made the pledge about half a year before local elections nationwide and nearly a year before an upper house election, in an apparent bid to prevent the hike, which is unpopular among many voters, from becoming a major point of debate in the run-up to the politically sensitive events.

Chief Cabinet Secretary Yoshihide Suga said at a press conference that Abe's announcement at this point is aimed at advancing discussions on possible countermeasures by the end of the year, when the government will craft its draft budget for the next fiscal year.

Suga, however, reiterated the government's position that the tax hike will be put on hold in the event of a crippling economic crisis, like the one caused by the 2008 collapse of U.S. investment bank Lehman Brothers Holdings Inc.

During the extraordinary meeting, the Cabinet also approved a supplementary budget of 935.6 billion yen ($8.37 billion) for fiscal 2018 to promote reconstruction in areas hit by torrential rain, earthquakes and typhoons earlier this year.

Abe said Japan's economy has grown steadily with more new jobs due to his "Abenomics" growth package since he returned to power in late 2012 and it is time to transform the country's social welfare system for "all generations" so not just elderly but young people can feel secure about their lives.

About half of the expected additional annual revenue from the tax rise, expected to be over 5 trillion yen, will be used to cover rising medical fees, child-rearing and nursing care costs, as well as to finance free preschool education due to start from October next year.

The government will introduce a reduced tax rate of 8 percent on daily necessities such food and newspapers but excluding dining out and alcoholic beverages.

As a way of alleviating any adverse impact on businesses, the government is considering supporting small and medium-sized retailers by allowing them to refund 2 percent of consumers' purchases in the form of reward points for a limited period in the case of cashless payments such as those made with credit cards.

In an attempt to balance out an expected surge in demand ahead of the tax hike and a plunge afterward, the government also plans to expand tax breaks and subsidies for pricey purchases such as cars and homes.

The measures are expected to be incorporated into the ruling bloc's tax reform outline to be compiled in December and the government's draft budget for fiscal 2019 beginning April.

Japan raised its consumption tax from 3 percent to 5 percent in April 1997. The consumption tax was first introduced in 1989 at a rate of 3 percent.

The rate was increased to the current 8 percent in April 2014 under the Abe administration.

Although the 2 percentage-point tax hike from 8 percent has been treated as the second phase of the two-stage rise from 5 percent to 10 percent, Abe pushed back the schedule twice, first from October 2015 to April 2017, and then to October 2019.

Restoring fiscal health is seen as an urgent yet difficult task for the debt-ridden country, given that the rapid aging of Japan's population means swelling social security expenses such as medical costs and pensions.

As Abe decided to review the allocation of the revenue from the envisioned tax hike with an increased focus on child care support, he delayed the target for achieving the country's fiscal rehabilitation goal to fiscal 2025 from fiscal 2020.