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Sales tax hike 'obvious' choice for Japan debt woes: IMF

37 Comments
By Leika Kihara

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A luxury tax fine - make it 20% even, but increasing the tax on everything, including basic necessities like healthy food, would be incredibly difficult for the poor to manage.

13 ( +15 / -2 )

Retail prices would go up a little more than 1.9%, not 10% (eg. Daiso 100 yen -108yenNOW-110yen)

The '10%' misconception is a big part of the hard sell for Abe, cronies and other consumption tax supporters. This is because 10% is the figure being thrown around by everyone and too many consumers cannot think the reality through.

There are also the similarly stupid and also cunning retailers who will always up their prices by an actual 10% above the already 8%-taxed figure, with the usual base price in large print and the taxed rice in as small a print as possible.

However this tax system has been in place for over two decades and the percentage is going to be ratchetted up by someone one day. Abe is going to quit in the time of the next government whether LDP win or not. It is better he be remembered for this unpalatable yet unstoppable policy than someone more palatable than he is.

-1 ( +4 / -5 )

The IMF needs to pull their head in. The first sales tax hike was touted to be used to decrease Japan's public debt, but Abe and his criminal cronies did not use the money for that purposed. The 3% sales tax hike resulted in a drop in spending from 10% to 25% depending on the sector. You don't have to be an economist to realise that, the economy is worse than before the sales tax hike. Now, these fliptards are recommending another increase? Again, pull your head in IMF!

5 ( +9 / -4 )

The 3% sales tax hike resulted in a drop in spending from 10% to 25% depending on the sector.

That was in 1989. Given the crazy situation of the time (bubble about to burst), it would be hard to pin the spending drop on the sales tax. The greatest hardship I remember of that tax was having to carry those 1-yen coins.

-3 ( +3 / -6 )

"What a great coincidence this gets reported right in the middle of election campaign....im sure LDP has no hand in this making news.

Even if one overlooks the dismal record of IMF , the problem is that a large portion of any sales tax hike proceeds will be wasted by LDP on feeding their cronies instead of paying down the debt...and it needs no mention that any hike will slam dunk the economy again as happened every time the tax went up. .....Wanna increase it anyway Abe ? then compensate the electorate by cutting other taxes and income tax brackets especially at the bottom end. Thats what other countries did when their consumption taxes went up ....but of course THAT part never gets mentioned by either Jiminto or the compliant , amakudari run J media .

8 ( +9 / -1 )

There is no debt.

The biggest holder of Japanese debt the Bank of Japan.

The bank of Japan is 100% owned by the Japanese government.

Other big holders of Japanese debt are Japan Post and the Japan Pension Fund, both government affiliated.

It's just a paper game. Japan sells debt to itself.

5 ( +9 / -4 )

The raise in the consumption tax wil hit low income households significantly more than the middle,high income........The next governament will have to be smarter...

5 ( +7 / -2 )

Curse the IMF, nothing but a bunch of out-of-touched privileged "economists" paid by their US masters promoting the US' crony interests.

0 ( +5 / -5 )

What's 'obvious' is the government has to cut its waistful spending, reduce its size. Cease giving tax payers money to big companies under the guise of R&D. Actually get companies like Toyota to start paying tax! Leave tax payers a surplus of money to spend!

6 ( +8 / -2 )

Curse the IMF, nothing but a bunch of out-of-touched privileged "economists" paid by their US masters promoting the US' crony interests.

LOL... What a ridiculous comment.

-7 ( +2 / -9 )

With a trade imbalance of 69 billion dollars in Japans favor- this is not in the US interest.

1 ( +2 / -1 )

A tax on sales is the way to make pay taxes by the poorest. The old people with only nenkin, the working poors with baitos at the lowest rate... they will pay it on 100% of their income because they spend every yen of their income to just survive. The rich class, even if they buy luxury accessories and cars, they only spend a fraction of their income... all the rest is free from sales tax. The middle class... er, where have they gone ?

5 ( +8 / -3 )

Whoops my bad, people love increased taxes to support an archaic system of government reliant on the plebs to support its bizarre free spending ways. OK I can understand an 80yo getting the equivalent of my yearly salery a month + extras as he fully supports raising my taxes??? Why not.

5 ( +5 / -0 )

There is no debt. 

The biggest holder of Japanese debt the Bank of Japan.

The bank of Japan is 100% owned by the Japanese government.

So what you are saying is money grows on trees after all. That Econ 101 professor back in college has a lot of explaining to do.

Raising the sales tax is a “very obvious” choice for Japan to get its fiscal house in order, a senior IMF official said 

Spending less on government programs than what the government takes in taxes seems "very obvious" to me - but obviously I am no economist.

3 ( +4 / -1 )

A progressive tax would be appropriate; wealthier people should pay more income tax. So should the big corporations - they aren't raising wages, anyway. The masses will suffocate, waiting for the trickle-down, while the IMP helps to facilitate their subjugation.

0 ( +1 / -1 )

New York City has a 8.75% sales tax on goods but there is no sales tax on food items purchased at grocery stores - and no sales tax on clothing or shoes under $110. There is, I believe, a type of luxury tax called a "Mansion Tax" on sales of all apartments or houses valued over $1,000,000.

Something like this would be fairer.

4 ( +5 / -1 )

sure! Why cut anything? And this has the added benefit of squeezing people and making them more afraid and willing to work even harder to pay the tax. Great! Japan is tired! More tax!

2 ( +2 / -0 )

This dude at the IMF is clearly clueless! As one poster said above the BEST way to reduce debt is to reign in wasteful govt SPENDING, they NEVER look at WASTE!!

They only look to increase taxes! And yes the LAST 3 percentage point increase from 5 to 8% was SUPPOSED to be used for debt relief & for social service costs.....I guess that means abe building HUGE vet schools for his buddies with the  govt footing the bill!

As I have said now for over a decade the masses in Japan have LONG been maxed out on taxes they pay, the problem is MOSTLY with the govt & also with big companies stockpiling massive amounts of cash, the pricks wont even give their employee's a REAL BONUS!

4 ( +4 / -0 )

A progressive tax would be appropriate; wealthier people should pay more income tax.

While I generally agree, it's all too easy for wealthy folk to hide their income. It's harder to avoid a consumption tax on a new iPhone or new yacht. There is a gulf between tax theory and the practical task of getting the money.

2 ( +2 / -0 )

No country ever taxed itself into prospeity. Then again, even a 10% sales tax is very reasonable compared to other western nations. WTF do I know though.

0 ( +1 / -1 )

@Burning Bush:

here is no debt. The biggest holder of Japanese debt the Bank of Japan.

The bank of Japan is 100% owned by the Japanese government.

Other big holders of Japanese debt are Japan Post and the Japan Pension Fund, both government affiliated.

It's just a paper game. Japan sells debt to itself.

Are you 100% sure about that?

Remember Japan lose the war, and guess who give japan the constitution?

then guess who implement the Central Bank in Japan, not only japan but every country in the world except 3 other country wish are in the axis of Evil.

keep dreaming that the Japan Ginko is own by the Japanese government.

0 ( +2 / -2 )

Japan is in its 3rd decade of financial predicament because of one reason only... The 1987 Plaza Accords!

1 ( +2 / -1 )

The government can also look around for other areas for taxation. But clearly, any strategy for fiscal adjustment needs to feature an increase in the consumption tax.

As opposed to something as radical or Draconian as...I dunno...cut spending to be less than income (none of that water-treading balance budget nonsense), so that debt can actually be repaid? I'm sure there's plenty of places where spending government isn't justified or done to support someone's nepotistic pet-project. Folks in government need to learn how to separate the wants versus the needs.

3 ( +3 / -0 )

IMF = Evil

Higher taxes = Bad

Reduce government spending = good

2 ( +2 / -0 )

"Abe has pledged to proceed with the move to raise the sales tax to 10% in 2019, from the current 8%, but said he wants to use the revenue more for education and childcare spending than paying down debt. "

I only doubt PM Abe pledge will go that way, just to see how his hawkie right-wing surroundings want to implement more ballistic weapons (huge cost) and more increases in national debts coming up. And who will get the profits? Just to know who sells them! And who can help with high interests the accumulated Japan debts--IMF?

0 ( +0 / -0 )

So what you are saying is money grows on trees after all. That Econ 101 professor back in college has a lot of explaining to do.

The Japanese government can print treasuries and yen at will, so yes, it grows on trees.

Remember day 1 of Economics class is "Assume all market participants are rational actors"

The buyers of Japanese treasures (The BOJ, the Pension Fund, Japan Post, Mizuho, SMBC, Mitsubishi-UFJ) are not independent rational actors, they will buy bonds even when irrational to do so because their senpai in the Japanese government told them to do so. The paper game can go on forever.

then guess who implement the Central Bank in Japan, not only japan but every country in the world except 3 other country wish are in the axis of Evil.

keep dreaming that the Japan Ginko is own by the Japanese government.

I'll bite, ostensibly the BOJ is owned by the Japanese government, but it may be another nefarious party. I don't have the means to research this. Do tell.

0 ( +2 / -2 )

The bank of Japan is 100% owned by the Japanese government.

That might be true for some other central banks, but not for the Bank Of Japan, which is listed for trading as 8301 on the Japanese stock market.

1 ( +2 / -1 )

Those who suggest that the IMF chap is a clown are right.

Hiking consumption tax to cover spending that the government has already committed is but one way to address the debt problem (and it is a big problem even if only for the chilling effects it has on the behavior of the disconcerted populace).

Major reforms to government spending programs is the other obvious option, but it is also obvious that the people who are spending the money do not want to stop spending the money, and the people it is spent on want to keep receiving it, all at our expense.

-1 ( +0 / -1 )

Other luxury tax options won't generate significant revenues. Just look at the beer tax debacle. Obviously a luxury but it just resulted in people buying something other than beer.

Taxes that are not low-rate, broad based in nature won't generate much revenue.

-1 ( +0 / -1 )

If raising taxes solved the problem then why are places like Chicago almost bankrupt. If you want to save money stop spending it on stupid things like roads to nowhere and ornate birds on crossing guards. When the tax went from five to eight percent it was suppose to put a dent in the debt but instead the Government just used it for other projects just like the USA.

-1 ( +0 / -1 )

In Japan's case there is a budget deficit adding to the debt pile, so any claims of the revenue increase being used to pay down debt were nonsense. The debt pile would continue to increase, albeit at a slower rate. That is not paying down debt.

Why don't other politicians and media call Abe out on such mischaracterization?

-1 ( +0 / -1 )

I am not a supporter of Abe however many people here are indicating the increased sales tax revenue is going to "LDP cronies" or making similar claims. I am not trying to be argumentative but I am wondering if there is evidence to back up these claims or specific instances where this has occurred.

1 ( +1 / -0 )

No country ever taxed itself into prospeity. Then again, even a 10% sales tax is very reasonable compared to other western nations. WTF do I know though.

In Japan there are a LOT of different taxes to be paid, here are some I pay that I can remember, income tax, health ""insurance", consumption tax & business tax based on income, 2 kinds of property tax,  2 local taxes, car taxes, & THEN there are taxes on actual consumption, buying stuff, toss in liquor, gas taxes, highway tolls

That's only what I can remember, its NUTS! & people ARE maxed out!!

0 ( +0 / -0 )

JT can you please get the quote function to work properly, about 30% of my posts end up getting displayed as quotes instead of just the quote...

0 ( +0 / -0 )

No country ever taxed itself into prospeity

The Scandinavian countries did. Canada, too, to a lesser extent.

The public sector is in deficit because the private sector is in surplus. If you want to balance the budget you'll need to take money out businesses and individuals and hand it back to the government. There, problem solved. Or not.

"The Bank Of Japan, which is listed for trading as 8301 on the Japanese stock market."

So what? The coupon payments on the JGBs held by the BOJ - 40% of the total in existence - end up back at the Ministry of Finance. That is one of many reasons why Japan can run up huge deficits with no risk.

0 ( +1 / -1 )

Q1) Why should the IMF care HOW Japan balances it's budget? Sales tax, income tax, or whatever.

Q2) Why should the IMF care at all about Japan's budget if it's not borrowing from the IMF? Japan contributes $30 million a year to the IMF.

Is the IMF selling custom ordered Gai-atsu for $30 million a year?

3 ( +3 / -0 )

So what? 

So the claim that the BOJ is 100% owned by the government is demonstrably false. Do keep up.

1 ( +1 / -0 )

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