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Abe to proceed with sales tax hike next year: Nikkei

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Abe vowed to proceed with next year's scheduled sales tax hike "by all means" and take steps to ease an expected hit to consumption from the higher levy

And that sums up the stupidity of this measure.

You don't need to find a solution if you don't create the problem in the first place.

a pledge to use proceeds from the sales tax increase to make Japan's social welfare system more sustainable.

Ridiculous. People will consume less, so how it won't make a difference.

Abe said the impact of the tax hike to 10 percent will be smaller than that of the increase to 8 percent.

Dream on.

15 ( +17 / -2 )

500.000 people leave the workforce in Japan every year. It is natural that employment rates are at lows right now and will get lower.. Abe is claiming credit for the sun rising in the morning. He is doing that as Abenomics has failed on every count. All three arrows have failed. The third one, structural reform, was not even shot so it did have chance to miss.

The working-age population, ages 15 to 64, is seen plunging 40% from 2015 levels by 2065. As soon as 2040, the figure probably will drop to 59.78 million, undershooting the current count by more than 20%. It is currently declining by more than 500,000 people per year, meaning it will probably be below the 2015 count by 3 million people as early as 2020.

So get ready for another recession in Japan next year. History will repeat itself. Sales taxes are very regressive so the increase will hurt working people the most. But PM Abe does not care about working people.

Abe could cut the defense budget or reign in spending instead of raising taxes again but that is harder to do for him than raising taxes. The working people of Japan have lost real income now for decades under the LDP. Yet they vote them back into power every election. If would be like the USA re-electing Bush Junior after he crashed the economy of the World in 2008.

14 ( +15 / -1 )

Brace yourselves, it will be 15% within 5 years. I've been telling people this ever since it went from 3% to 5%. The government will say "its on par with Western European countries, but the only problem is most of them over cradle-to-grave safety net whereas Japan throws away the money on over-employing civil servants and waste-of-money infrastructure projects that line the pockets of politicians and shady contractors...

14 ( +14 / -0 )

They are already charging insane prices for undersized vegetables and fruits. And they want to make them even more expensive?

13 ( +14 / -1 )

"Abe said his ruling Liberal Democratic Party (LDP) won last year's lower house election with a pledge to use proceeds from the sales tax increase to make Japan's social welfare system more sustainable."

They won because there were no alternatives. That does not condone doing whatever Abe wants. Unfortunately, he says it's a mandate for just that, and voting him in, which will happen again, is only going to strengthen his resolve.

Now watch as the BOJ and the government scratch their heads at the wonderment of people spending less at the news taxes are going up again, and watch them NOT spend it on the things earmarked for it, but Abe and Co. saying it needs to be used for defense against increased threats from China and NK (after the Constitution has been changed).

13 ( +16 / -3 )

Amazing how there was zero consumption tax all the way until the mid 80s.

A rose by any other name.

There was 物品税, commodity tax, whereby different levels of tax were levelled on different items; eg. green tea was tax-free, coffee was taxed; commercial vehicles were tax free, ordinary cars were taxed. The general idea was that you taxed luxuries, not necessities. (Coffee of course is not a luxury.)

Nowadays Abe et al. tell us that different tax rates on different items is just too, too difficult and complicated and we have to have an easy, across-the-board tax on everything from daily groceries to diamond jewellery to gold-plated toilet seats.

its on par with Western European countries

Where groceries, children's clothing and education are taxed at zero rate.

11 ( +12 / -1 )

What is everyone complaining about?

Dont you see those Aegis missle systems protecting you and the new coast guard ships telling you to refrain from collecting a few shellfish?

Lets empty our pockets so Abe Sama can jet round the world whipping up pressure against North Korea..,,,

Isn't a 50% a better figure?

9 ( +9 / -0 )

When I first came here it was just 5%. Now it's gonna be 10%. Just wow. Minimum wage remains unchanged.

8 ( +9 / -1 )

This better be the last tax hike. I can barely afford my daily beer and potato chips.

6 ( +6 / -0 )

Abe is a lucky man because Japanese people are milk cows for him to attack. There are money for warfare but no money for welfare. But be careful Abe, don't turn the milking cows into mad cows.

6 ( +7 / -1 )

Would it be cynical of me suggest that today is a good day to bury some bad fiscal news, since most of us are rightly preoccupied with the shocking typhoon issues?

On second thoughts, maybe not. I'm probably being too suspicious of political strategists.

6 ( +6 / -0 )

Up yours little Taro...I know you will still vote for LDP even if we raise your taxes without any compensation whatsoever. I need more mola for my business budies pockets and to buy some more of those fancy and unnecessary shiny weapons systems. Knew I could count on you to just mumble ' shooganai' and let me do whatever I want. Nihonjin de yokatta.

Sincerely Shinzo.

5 ( +6 / -1 )

Let’s all just remember that the spending is 100 trillion yen a year, the tax revenues approximately 65 trillion yen (adding a few trillion to account for the tax hike)

There is a 35 trillion yen deficit in the budget, and doubling the consumption to 20% still would not plug it.

I was not surprised to see Abe suggesting “life-long work” on TV this morning. If 120 million people’s income and consumption tax can’t pay for all the spending, it is clear that spending needs to be cut. Money doesn’t grow on trees, it is limited.

5 ( +5 / -0 )

make Japan's social welfare system more sustainable.

Sustainable is a simple binary term.

The system is unsustainable even with the tax hike, like the government’s entire finances.

4 ( +4 / -0 )

Just in time for the Olympics and to destroy the economy after it.... watch spending crash.

4 ( +5 / -1 )

Its never enough. Sweden started off small (think 5%) back in the 70s. Now its at 25%...and sweden has a much better social welfare system than Japan (or really any other country). Until structural reforms are in place, such as mandatory 1500 hours or less per year of work (covert and overt inspections on companies and govt agencies), pension for those over 60 at cost of living for locality, minimum salary (all are salaried with above 1500 hour cap) at cost of living for locality, etc.

4 ( +4 / -0 )

500.000 people leave the workforce in Japan every year. It is natural that employment rates are at lows right now and will get lower. Abe is claiming credit for the sun rising in the morning. 

That’s why they need the extra tax revenue though. Someone’s got to pay for all those old folks’ pension and healthcare:

to make Japan's social welfare system more sustainable

God forbid they let some more immigrants in to do it.

3 ( +4 / -1 )

"This time, there will not be a major problem when tax is raised, because the economy is healthy and booming at record levels."

Not for the top 1%, it will be a major problem for everyone else.

3 ( +4 / -1 )

I don't understand why Japanese so aggressively oppose to just 2% raise. Japan boasts (still) top level of social security, debt mounts to circa 300% of GDP, and everyone doesn't want to lose national health insurance system. Everyone doesn't want to lose annuity either.

It's simply unfair to pass the burden to the young. It is evident that the elderly has received the most, and they have to pay for what they got. And indirect tax such as consumption tax is the best way to get money from all of the elderly.

3 ( +3 / -0 )

If this democracy decided that its ok for today’s populace to spend 100 trillion yen each year, of which 35 trillion is borrowed from future tax payers, then is democracy really so great?

My Japanese kids aren’t getting a say in this, too young to vote, although they’ll be paying those future taxes. I don’t think they’d like what is going on if they could understand it. I think they’d feel they’ve been shafted by ‘democracy’ of the current generation.

3 ( +3 / -0 )

@Vernon It might go to 20% soon after that. Amazing how there was zero consumption tax all the way until the mid 80s.

2 ( +3 / -1 )

Shinzo makes another vow, how many is that? It truly is amazing that his vows, promising to take more money from tax payers is seen as being benifiting the population? How exactly does that work? Robbing the poor to pay the rich, now that makes sence. I would suggest another corporate tax cut as they don't pay anything anyway and a massive hike for ordinary tax payers to pay for things like an unwatered veterinary college or two planes for flying already entitled people all over the world. Second hand tires can be used as indoor sandals, now that is useful information, we need it.

2 ( +3 / -1 )

...do not implement until all those above checked off. Forgot to finish...sorry ;)

2 ( +2 / -0 )

This time, there will not be a major problem when tax is raised, because the economy is healthy and booming at record levels. Things will keep ticking along nicely.

You honestly live in some parallel universe....or the PR fluff that your LDP bosses tell you to spread is getting beyond laughable.

2 ( +2 / -0 )

This is going to choke the Japanese economy. Better to cut spending.

@Reckless - Switch from those greasy ( I know, but tasty ) potato chips to way, way cheaper by weight fresh potatoes, microwave 'em til they're soft, cut 'em up, mix 'em up with some milk, a little butter and salt, and ya got tasty & cheap potatoes that are better for you than the chips. Oh yeah, and switch from regular beer to now available Suntory Kyo No Aki 3rd category beer. These significant cuts in your expenditures will help deal with the tax hike, which, unfortunately, probably won't be the last one, lol.

1 ( +3 / -2 )

Steve:

Please see my previous post for the answer. Further, the govt is supposed to enact laws with the consent of the governed. If more than 50% of the people say no and the law is passed anyway, is that a democracy? Yes, there is a diet and it's representative democracy, but shouldn't diet members and the pm listen to the people?

1 ( +1 / -0 )

Japan consumption tax is a capture all blunt instrument which will inevitably result in a change in pricing opportunity for the consumer, i.e. the cost of goods/services now, relative to the same goods and services in the future.

Households will stockpile and reaggregate there spend when the price level is lower. The buy before use to store effect. The aggravate demand curve.

Ultimately the reality is, the most vulnerable in society will feel the pricing effect increases. Child day care, home energy costs, family/children nutritional needs, clothing etc etc.etc .....

Imagine the effect of a 10% tax on residential property purchases will have on the property market?. Personal consumption account for some 64% of Japan's gross domestic product.

It is time for Abe san to consider less government, spending cuts across the board in every ministry.

There is little or nothing that creeps below the radar of the NTA consumption and Local Consumption Taxes.....

https://www.nta.go.jp/english/taxes/consumption_tax/02.htm

Does Abe san what to be remembered as a modern day Sheriff of Nottingham?....

Economic, fiscal policy management needs a plan of reform and restructure. It is a tough call, cuts in social welfare expenditure will not be a vote winner.

1 ( +1 / -0 )

Some high earners will need to contribute more, swings and roundabouts I am afraid.

1 ( +1 / -0 )

Pensions are slowly but surely going down, and they are hardly extravagant in the first place.

Pensions were originally conceived decades ago when life expectancy was much shorter, as a means of supporting people in old age when they became unable to support themselves.

Over time life expectancy has increased, that is, a fundamental assumption underlying the system has changed. (Another is the change in demographics.)

What's done is done, but given the 35 trillion yen budget hole that Japan is in, now is the time to get serious and start transitioning to a sensible system that works for today, and hopefully will work for the future as well.

That huge amount of money should have been carefully invested and grown 

Define "carefully invested and grown", and check whether the definition is the same for 40 years ago versus today.

Instead the politicians blew the 'surplus' money on white elephants, empty concrete boxes and roads to nowhere, to keep their construction company pals sweet.

Welfare spending today is equivalent to tax revenues. The budget for all infrastructure spending is less than 10 trillion yen, versus the 35 trillion yen deficit.

At the same time they also messed up the pension records so that it wasn't necessarily clear who had paid in what.

"They, they, they". The mysterious "they". 

This is important to recognise - "they" have screwed it up. So if we are to transition to a new system (I think it is imperative), an important question to ask is, what evidence is there to suggest that "they" won't mess it up again, next time, too?

I'd say that there is no such evidence, and this is something that voters and tax payers ought to think about carefully when considering what should be done.

1 ( +1 / -0 )

Over time life expectancy has increased, that is, a fundamental assumption underlying the system has changed

And the retirement age has also risen.

Another is the change in demographics

The 'change in demographics' was apparent well before the baby boomers started to reach retirement age. Not changing the system well in advance to accommodate that fact was a major mistake.

Define "carefully invested and grown", and check whether the definition is the same for 40 years ago versus today.

I think the definition is pretty much the same then and now. The problem is that 40 years ago the politicians saw the 'surplus' money as an opportunity to spend, spend, spend rather than invest and plan for the future. Most politicians cannot see any further than the next election, never mind 40 years into the future. The baby boomers' taxes and social welfare premiums were blown on roads and bridges to nowhere and vote-buying eg., in the form of the Furusato Sosei Jigyo (a policy of handing out gifts of ¥100 million to local municipalities to spend as they pleased - a lot of it went on tacky monuments, statues, empty museums and other how-to-throw-good-money-after-bad projects.)

The mysterious "they"

Nothing mysterious about it. The third-person plural pronoun refers naturally to the plural noun immediately preceding it as the subject of the sentence, in this case The politicians. Reading skills, fxgai, basic reading skills.

what evidence is there to suggest that "they" won't mess it up again, next time, too?

None. Whatsoever.

I'd say that there is no such evidence, and this is something that voters and tax payers ought to think about carefully when considering what should be done.

On this we are agreed.

1 ( +1 / -0 )

Got to pay off all his trips

0 ( +2 / -2 )

Robots don't pay taxes

0 ( +2 / -2 )

Sales tax in the state of Alabama is 8.45%

0 ( +0 / -0 )

It is evident that the elderly has received the most,

I'm not sure what you mean by that. Pensions are slowly but surely going down, and they are hardly extravagant in the first place.

and they have to pay for what they got. And indirect tax such as consumption tax is the best way to get money from all of the elderly.

Those who fill the ranks of 'the elderly' today are the busy bees of the rapid-growth and bubble eras, who paid huge amounts into the system on the understanding that they would in return receive the pension/welfare they needed when they were old and no longer in the work force. That huge amount of money should have been carefully invested and grown in preparation for the inevitability of the ageing population - the demographics were there for all to see. Instead the politicians blew the 'surplus' money on white elephants, empty concrete boxes and roads to nowhere, to keep their construction company pals sweet. At the same time they also messed up the pension records so that it wasn't necessarily clear who had paid in what.

And indirect tax such as consumption tax is the best way to get money from all of the elderly.

If by best you mean successfully gouging more proportionally from the little old lady debating whether to buy a bite to eat or pay the electricity bill in order to have air conditioning/heating than from the fat political dinosaur or business whizzkid debating whether to have gourmet French or gourmet Washoku for dinner or whether to spend the weekend at his country club or at his mountain villa, then yes, I suppose it is best. What it is not is fair, equitable, even-handed, impartial or even efficient. And it's certainly not good for the economy or for the moral health of the nation.

0 ( +1 / -1 )

As I mentioned in a post about a month ago, be prepared to be taxed to hell on more pretexts, like increased income, real estate, inheritance, asset, cigarette / alcohol, usage tax, etc. The only criteria is the limits of your imagination. Of course, someone could consider less government spending...

0 ( +0 / -0 )

If food prices were cheaper in this country I wouldn't mind as much...Many younger people now avoid eating fruit and vegetables due to the high cost...and getting higher.

0 ( +0 / -0 )

be easier to declare yourself a business and get a "contract" from the Abe gov't

-1 ( +1 / -2 )

With record low unemployment, an economy growing for longer than any time in 75 years, and growth-spurring Tokyo 2020 Olympic just around the corner, the timing is right. PM Abe is showing strength to raise the tax to 10%, when weak people would postpone.

This time, there will not be a major problem when tax is raised, because the economy is healthy and booming at record levels. Things will keep ticking along nicely.

-6 ( +1 / -7 )

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