tax hike. japan's prime minister pushes through his signature financial reform package, but now he must pay the political price. welcome to nhk world "newsline." prime minister yoshihiko noda says japan's fiscal situation is dire. it has a mountain of debt and an aging population. he's convinced lawmakers to raise the consumption tax and modify the social security system. members of the upper house have enacted a financial reform package.

the main opposition liberal democratic party and its ally new komeito supported the ruling democratic party in passing the bills. the prime minister had to agree to dissolve the lower house soon and call a general election in exchange. he technically didn't have to do that until next summer. the legislation will raise the consumption tax from 5% to 10% by 2015. lawmakers in the lower house passed the financial reform package in june. noda's dpj negotiated with the opposition on that vote as well. >> translator: japan's society is aging at a rate faster than any in the world. at a speed humankind has never experienced. social security costs are growing by nearly $13 billion a year. someone has to bear the burden to support that. let me promise you that all the taxpayers' money collected by the tax hike will be paid back to the japanese people in the

form of social security. all of it will be used for social security. nhk world's senior political commentator masayo nakajima came by the studio earlier to give us some insight on this story. prime minister noda, he gains by raising the consumption tax and reforming the social security system at the same time. is this a win-win situation for the prime minister as well as for japan? >> in short, noda has steered japan away from a financial crisis, at least for now. though -- the country faces -- carries a greater proportion of debt on its books than any other developed nation in the world. and that public debt is rising second by second. paying for social security is putting an increasing strain on national finances. plus, the government is paying billions of dollars in the aftermath of last year's earthquake, tsunami, and nuclear accident. noda has emphasized that japan

should not end up like greece. >> japan has avoided financial crisis, as you say, but it still has one of the biggest debts among the g-7 countries. is the tax hike enough to balance japan's budget going forward? >> noda says it's only a step toward dealing with the aging population and growing debt. he admits that raising the consumption tax up to 10% is not a complete solution for restoring fiscal health. as far as the tax rate goes, we are now coming closer to what governments in other developed nations collect. noda has suggested that there's still room to increase the rate beyond 10%. but that's not a popular stance among politicians and voters. many japanese are still against the tax hike. they want noda to do more to slash wasteful government spending. >> how does the passage of this

bill affect japanese politics? >> well, the prime minister has staked his political career on this issue. so now he can say he has fulfilled his pledge to the public. but noda had to give something up for the opposition support. so he has to call a general election soon even though he and his dpj are suffering record low public support. the democrats took power three years ago after 50 years of almost uninterrupted rule by the ldp. but many japanese voters are tired of these established parties. you know, a couple of the new parties are expected to win relatively high proportion of seats, but it will be still difficult for any party to secure a majority alone. they have to work together and struggle to form a new coalition government. >> nhk world's masayo nakajima speaking to us earlier. japanese business leaders

have generally welcomed the consumption tax increase, but some of them say they need to continue reforming social security to reduce the burden on japan's finances. hiromasa yonekura, chairman of the business federation, or keidanren, is among those who praised the legislation, but he says the government must reform social security in a more cost efficient way while focusing on the people's needs. tadashi okamura is chair of the japan chamber of commerce and industry. he welcomed the passage of the bill but expressed concern at its impact on small and medium-sized firms. okamura urged the government to tackle deflation and help smaller firms deal with the extra price tag on their products and services. the passage of the bill was greeted with mixed reactions among the public. >> translator: i think it's good that the bill was passed today. we should not leave this country's debt to our children

and grandchildren. >> translator: i don't think it's acceptable to raise taxes while our lives are becoming more difficult. that's why i'm opposed to the tax hike. >> translator: i want the government to clarify how it will use this money. the raise should be used to deal with the declining birth rate in asian population. i am opposed to it if the government stays vague on this issue. >> here's the reaction of a man from miyagi prefecture who lost his home to last year's tsunami. >> translator: i don't have a home. i don't have a job. if they raise the consumption tax, i'll be hopeless. there's no way i can make ends meet. >> the consumption tax will be raised from 5% to 8% starting april 2014 and to 10% from october 2015. we look at how the tax increase affects japanese families.

nomura securities did calculations using its own data and those from the internal affairs ministry household budget survey. they included purchases of big-ticket items like cars. the calculations were for households of two or more people each and assumed that the consumption tax stands at 10%. nomura says that for a household with an annual income of between $25,000 and $32,000, the tax burden would go up by about $1,500 a year. a family earning between $127,000 and $159,000 would be paying $3,300 more. the table shows that low income households would be carrying a disproportionately heavier tax burden. the government says the use of revenue from the consumption tax will be limited in principle to covering social security benefits like medical services, nursing care and child rearing support. owners of small factories

struggling to survive the intensifying price war are worried about the impact of the tax hike on their business. nhk world's daisuke azuma has more. >> reporter: these small businesses are the backbone of the japanese economy, and the people running them are concerned about the tax hike. these -- this plant employs 20 workers and they produce custom made windows and and fire prevention doors for commercial buildings and condominiums. plant manager masao mizutani has 40 years of experience under his belt. he says price competition in this industry keeps heating up every year. he thinks that cutting prices as much as possible is vital to win orders.

so even when the consumption tax goes up, mizutani says he can't simply pass the additional cost on to the prices of his products. >> translator: the current 5% rate is already weighing on financing. so once the rate goes up further, it will be difficult to just increase prices. i guess it's a problem shared by many manufacturers like us. >> reporter: the higher tax also puts future business plans in doubt. the company has been considering replacing some old machines. but it now has no idea how to raise enough money. >> translator: if sales go up, we can't turn a profit and won't be able to pay the loan to buy new equipment. manufacturers may have to give up business and die out.

>> reporter: the tax hike is designed to help restore japan's fiscal health. but the question is how it will affect the small businesses that have long been a driving force for the economy. daisuke azuma, nhk world, tokyo. the tax hike may be causing concern for small businesses and households, but economists say japanese leaders had to make this decision and will face even tougher choices. we got some perspective from naomi fink of jefferies japan. >> it's a step in the right direction. it's something that has a fairly wide base. it's a fairly efficient tax. it should go some ways to repairing the fiscal surplus. >> but a higher tax rate is a bigger burden for japanese households. fink has concerns about how a drop in personal consumption may

dampen economic growth. >> early 2014, prior to the hike, i anticipate we'll have at or near 2% growth. we have seen instances of front-loaded demand in the past prior to consumption tax imposition and hikes, so i expect we'll see the same this time. however, in latter 2014, after the implementation of the hike, i do anticipate that growth will slow, possibly to the 1% handle and possibly below. >> a weak economic growth forecast is a warning signal. the legislation contains a nonbinding clause. it says the tax hike will go into effect only if the economy grows. >> now, as a guideline, i would say 2% is probably the -- it's probably the barrier. if we have close to flat growth, i expect implementation will be at least delayed if not

indefinitely postponed. >> japan is aiming to turn its primary budget balance to a surplus by 2020, but some analysts believe raising the consumption tax to just 10% won't be enough. the international monetary fund is urging japan to push it up to 15% at least. fink says other measures need to be taken in addition to raising the consumption tax rate. >> i don't personally think that increasing consumption tax alone is the solution to fixing japan's fiscal balance. i think the increase in consumption tax has to go along with reflation and corporate profitability and increasing the corporate tax base. even increasing the income tax base.

south korean president lee myung-bak is stirring up regional tensions by doing something an official in his position has never done before. he visited a group of disputed islets in the sea of japan. the japanese government has launched an official protest. the south koreans control a set of islets they called dokdo. the japanese say the territory belongs to them. they call it takeshima. president lee flew to the islands accompanied by his environment and culture ministers. a senior south korean official stationed there briefed lee on the situation. he also inspected coast guard facilities and an observatory deck. he left after one and a half hours. experts on the issue say lee's trip will hurt japan/south korea's relations. prime minister noda reacted sharply to lee's visit to the islands. >> translator: takeshima is japan's inherent territory,

historically and based on international law. the visit by south korea's president was unacceptable. the japanese government is adamant on this issue. >> the noda administration has launched a protest against the visit with south korea's ambassador to japan. it has also ordered its ambassador in seoul to temporarily return to tokyo. lee made the trip as south koreans are getting ready for a presidential election scheduled for december. many have criticized him for how he's handled this territorial issue. they also want him to resolve another ongoing dispute with japan. lee has repeatedly asked prime minister yoshihiko noda to make an agreement over the korean women who were forced to work in brothels for japanese soldiers during world war ii. survivors are demanding official compensation and an apology. the japanese government maintains it settled the issue decades ago.

next wednesday marks the 67th anniversary of south korea's independence from japanese rule. political analysts say the occasion has stirred up national sentiment. opposition parties are calling for a stronger stance on japan. lee has been facing criticism over a corruption scandal involving his brother. analysts say the president is trying to gain support and assert his power as his term nears its conclusion. experts from the international atomic energy agency have ended a two-week fact-finding mission to the onagawa nuclear plant in northeastern japan. the plant was located 70 kilometers from the epicenter of last year's earthquake but unlike fukushima daiichi, it managed to avert a severe accident. nhk world's kaho izumatani reports. >> reporter: the main purpose of the iaea mission to onagawa was to determine why it was able to withstand last year's earthquake

and tsunami without any major malfunction. >> the team concluded that the structural elements remain remarkably unaffected given the magnitude and duration of the ground motion. this indicated that there was significant margins in the design. >> reporter: the experts are planning to supply data to iaea member countries so they can conduct their own safety assessments. they also requested the japanese government to allow similar missions to other plants in the near future. recent investigations into fukushima accident have pointed out the government's failure to implement iaea safety recommendations before the nuclear crisis. the question now is to what extent japanese authorities will accept to cooperate with the agency. kaho izumatani, nhk world, tokyo.

now a quick look at some stories from the united states. the u.s. space program has been hit by a setback. >> three, two, zero. a pretotype of an unmanned moon lander has crashed and burst into flames during a test flight in the state of florida. nasa and private sector firms are developing the craft known as morpheus to carry supplies to the moon's surface. the vehicle uses liquid oxygen and relatively easy to handle methane as fuel to save on costs. nasa says the craft lost ability because of a hardware component failure. the mars rover curiosity has sent back the first colored panoramic view of the crate wrer it landed. the images show a 360-degree view of the mountain-like rim of the gail crater. at the center it's possible to see a 5500-meter peak called mt.

sharp. nasa says the resolution is about 1/8 the usual level because the images were shot as a test. it says engineers are stipg efforts to get all of curiosity's functions operating. the u.s. centers for disease control and prevention says 116 more people have been infected with a new strain of the swine flu virus. the h3n2v strain was first identified in the u.s. last august. the total number of infected people has risen to 145. the cdc says more than 90% of them are children, but that they have all recovered. the virus has genetic similarities with the h1n1 strain that caused the 2009 pandemic. it could become more infectious if it mutates. the center says the number of patients has risen as many agricultural fairs are held at this time of year.

it's advising people to avoid pigs. indonesia's economy is enjoying robust growth and the people are broadening their horizons by embracing new types of food. right now indonesians are gobbling up japanese cuisine. nhk world's desi tanjong reports from jakarta. >> reporter: this cooking show is very popular in indonesia. mainly among local housewives. >> reporter: on this show, a japanese chef demonstrates how to prepare the cuisines of his

homeland. but he tricks ingredients and presentation to make the dishes more -- this is another attractive feature. the program is a big success with viewer ratings sometimes above 20%. his tv appearances have met 51-year-old japanese chef hirom i a household name in indonesia. he also runs a japanese restaurant in jakarta. he has a long history with cuisine. he started training as a sous chef at the age of 18. at the age of 26, he heard japanese cooks were being hired in jakarta and decided to give it a try. two years later, he married an

indonesian woman and opened his own restaurant shortly after. all in all, he has been serving japanese cuisines to indonesians for over 20 years. >> translator: the indonesian people are rich in human qualities. but the country's food lacks diversity. i want indonesians to have a well-balanced diet that includes vegetables and boiled ingredients. >> reporter: indonesian women are no longer satisfied with occasional visits to restaurants. they want to cook japanese dishes in their own homes on a regular basis. a major bookstore has set up a special section for japanese cookbooks. japanese cooking classes are also becoming popular. schools are overwhelmed by the

demand, and some classes have more than 3,000 students. harada has launched a new service to meet the growing demand for information on japanese cooking. he now travels to his customers and gives a live demonstration of japanese cooking. the on-site cooking shows are very popular. one attracted a crowd of more than 300. mostly housewives. >> translator: it's delicious. it's really good. i'll try to make it at home. >> reporter: harada goes to the tv studio two times a week.

and filming takes as much as seven hours. but the dedicated chef is more than willing to stand in front of the cameras in order to bring a taste of japan into indonesian homes. desy tanjung, nhk world, jakarta. it was a hot, sunny day here in tokyo, but it looks like some rain in the forecast. robert speta is here with more. >> yes, it has been rather sunny all week, but now, unfortunately it does look like throughout the weekend some severe weather could be popping up across much of japan. it's really due to some cold air drifting in from the north here. it's going to be cloudy with warm air surging in out of the tropics allowing the western periphery of the high pressure there off towards the east. and this collision of air masses is going to be resulting in severe weather across much of japan. specifically in western japan, you're going to be having large hail, gusty winds and lightning very well could be possible in some isolated areas out here. not just in japan.

over toward the west, across the korean peninsula could be seeing similar conditions across much of this region as well. now farther towards the west we continue to watch haikui here lingering over eastern china. this is going to be bringing an additional 25 to 50 millimeters of rainfall. some isolated areas out here could be seeing upwards of 100 to 150 millimeters. now the good news is that going through the weekend, expect this to continue to dissipate. and it will begin to weaken, bringing in fairer conditions. across the tropics, we are watching that monsoonal flow. nothing organized out here as far as named systems, but that monsoonal flow is bringing destructive weather. across thailand, myanmar, you've seen in the past 24 hours upwards of 100 millimeters of rain. now the next 48, 100 millimeters will be falling here. across manila, you are continuing to recover from the devastating floods this week. over 1 meter of rainfall in the past week alone. as you can see here,

still some moisture moving onshore. it's not as intense and not as strong as it's been, but still going to be expecting these afternoon and evening rain showers throughout your day here going into your weekend. temperaturewise, tokyo, you are getting up to 30 here. going to be seeing some rain showers potentially there on your saturday. toward the west, chongqing up to 38. definitely stay out of the sun if at all possible here. now towards the americas, talking about ernesto. it's moving across southern mexico now. starting to work its way in towards the pacific ocean. while it's doing that, it's grabbing moisture here and dumping it along the west coast. so potentially could be seeing some flooding along the western mountains. not to mention it's still grabbing moisture out of the east and bringing it there. it's now a tropical depression. continuing to weaken as it pushes off there toward the west. as far as the north here, though, we have a low pressure area moving through the northern rockies. this could be producing some dry lightning. potentially could cause some wildfires there. in towards the east, a cold front continuing to push off toward the east. this has produced golf ball-sized hail. additional severe weather could

be possible with that as it continues to rush toward the east. behind it, high pressure is setting in. bringing much fairer weather. cooler temperatures as well. toronto all the way up to 23 here on your friday. 23 as well in chicago. look at phoenix, though. 44 for your high. definitely a heatstroke is going to be very high at risk there across much of the southwest. now in europe, across the west, the iberian peninsula, high pressure has been dominating here. very hot across much of spain. actually in madrid, expecting temperatures into the low 40s. across much of the uk, though, high pressure also dominating here. a little cooler, though. look at the extended outlook for your weekend there in london. saturday and sunday, sunny skies here for those closing ceremonies. temperatures remain into the low to mid-20s. but after the olympics on monday, expect some rain showers for you to be flying out there. here's a look at your extended forecast.

we'll be back with more updates in 30 minutes. i'm gene otani in tokyo. from all of us here at nhk

world, thanks for joining us. have a great day wherever you are.