Japanese authorities plan to go ahead with a sales tax hike in October despite concerns that it might dampen consumption. They say it's needed to cover the growing social welfare costs of a rapidly aging population. CGTN's Terrence Terashima reports on the impact it may have on the country's economy.

Prime Minister Shinzo Abe has said Japan will proceed with its sales tax hike as scheduled in October. This comes despite risks from a decline in global demand, the possible impacts of Brexit, and soft wage growth. Recently, Finance Minister Taro Aso said the fundamentals of the Japanese economy remain sound and that as a whole, it continues to cope and is being led by domestic demand. However, experts say private consumption remains at a moderate pace, despite the government's optimism.

NAOKO KUGA NLI RESEARCH INSTITUTE "Long-term analysts have shown that wages have been declining since the year 2000. Consumers have constantly been tightening up on spending, regardless of age and status. This has been due to social security concerns over a declining birthrate and an aging society. Unless we see a steady increase in income and a more sustainable social security system, the anxiety will remain and consumption is unlikely to expand anytime soon."

Japanese consumers have expressed concerns over the forthcoming tax hike, but experts believe its impact will be limited this time around. The government just passed a record-breaking 18.4-billion-dollar fiscal budget for 2019, which includes allocations for programs to prop up consumer spending.

NAOKO KUGA NLI RESEARCH INSTITUTE "After the last tax increase, it took three and a half years for consumer spending to recover. This time, at only two percent, there are still a number of tax relief measures, such as reward points and free childhood education, which will help compensate for household spending."

However, critics say some of these measures require reconsideration and could cause disparity, depending on a person's income.

TERRENCE TERASHIMA TOKYO "The government's steps to cushion the impact of the two-percent sales tax hike may ease consumer sentiment. However, analysts say a slow economic growth may continue to limit household spending. Terrence Terashima, CGTN, Tokyo."