Gov't considering Y10 trillion stimulus to offset sales tax hike: sources

Right, once again a cosmetic move. More money into the pockets of large corporations and a one time (AGAIN) feel good payout, to soften the blow of rising taxes!

Instead of wasting more tax money use the "stimulus" to pay US back! It's our money you are tossing about!

So, if I have grasped this correctly, the government is spending tax payers' money to offset the damage done by raising the tax in the first place.

Why not reverse the tax rise?

I was watching the news the other day, and they were trying to explain how the new tax would work, especially concerning food at restaurants and supermarkets. It is so convoluted and confusing, I don't think anybody will be able to understand it properly.

Also, I agree with Ah_so, if you are going to spend so much money to offset the tax, then just don't raise it in the first place!

Abenomics: taking more hard earned money from tax payers and throwing it out the window for stimulus packages which never have worked.

The stimulus package could raise concerns about Japan’s public debt burden, which is already the worst among major economies at twice the size of its $5 trillion economy.

I hope Reuters realizes that almost all of Japan's public debt is held by Japanese IN Japan. Money can be printed if and when the creditors call in the debt. So, the "debt crisis" is not a major issue unlike other Nations with huge foreign debt and interest.

As for the stimulus, it seems very prudent, in the event the economy has trouble for a few months adjusting to small tax increase.

Tourists pay no sales tax because it increases consumption, but Japanese pay 10%

it is very telling that they don’t complain about it. They are the dream population.

Yippee. Another useless move for the incredibly apathetic public. Nothing to see here folks. Move along.

I hope Reuters realizes that almost all of Japan's public debt is held by Japanese IN Japan. Money can be printed if and when the creditors call in the debt. So, the "debt crisis" is not a major issue unlike other Nations with huge foreign debt and interest.

Right!

How does this fact escape so many? But then again, consider the source.

I imagine the IMF/world bank (oh you just gada love those central bankers) are pushing for the tax increase.

Watched an old Little House on the Prarie last night and the main theme was raising property taxes. One angry guy said “just wait, soon they’ll be taxing you on what you earn!” LOL

@Insane Wayne, I don't know where you get the impression that tourists don't pay sales tax, because you're wrong. It's only a small percentage of tourists that use the tax-free shops in Japan. Most tourists on middle-income budgets, like me, pay the price of whatever it is, wherever we go. Get off your high horse.

Domestic consumption will decrease again, companies will garner more profits, and not raise wages. Tax payers will have less to spend. Government should reduce their spending by 10%. Leve the population at its current level of financial stress.

Again J-gov looking like a teenager with his parents' credit card.

In defence of the govt, what are other options, instead of raising tax ? Japan is the poorest nation on the planet, debt to gdp ratio is 250. Raise tax is bad thing, it is even worse if the nation bankrupts.

Tax breaks for car purchases

This is usual Japan, money for the big companies.

and shopping vouchers to help low-income households,

But this is an insult to low-income families! Don't do anything to help with their situation, give them some vouchers to shop because they are so poor they can't buy anything new.

I also heard on the TV that they want to give 2% "tax discounts" if you pay with credit card in the supermarket, which makes no sense. I just looks like someone in the government owes something to big banks..

Just keep printing money Japan. Eventually you will hit the bottom of that hole.

We’ve heard these promises of stimulus payments before and the money rarely ends up being used for original purpose.

 if you are going to spend so much money to offset the tax, then just don't raise it in the first place!

I suspect that in reality the government has little interest in shoring up its debt or in funding its pension system. Raising the consumption tax for those reasons is just a ruse to pump more money into construction projects.

A break for big companies translates into an under-the-table handout to banks. Can’t have corporations fail because it is the banks who would ultimately suffer. We workers just dont get our bonuses or raises. Companies just do away with their QC people, etc. Banks are the ultimate sacred cow we cannot lose. National debt may be held by Japanese but banks are not healthy. Japan, Inc needs to take care of them.

Ah yes, the legendary 5th arrow of Abenomics, right into the heart of middle class! Thanks blueblood Shinzo, we havenkt forgotten about your land scandal and the myriad of other scandals. How about we axe the useless head of the Olympic commitee first and save 30% yen per year. I 'd like to see Renho get back into her waste slashing mode again and start at the top with useless bureaucrats who do nothing but leech off of our hard work, only because of their connections.

The USA cut taxes and the economy took off like a rocket, and tax revenues collected by the government have been record breaking monthly. Anyone ever get the opinion that tax rate is too high in Japan?

Lowest minimum wage from developed countries surveyed, coupled with non regular and part time employment is the problem. You can't survive well in Japan on a wage of Yen 120,000 per month. Rent, power, gas, phone, health insurance, pension payment, tax, food, transport--- do the math.

", the "debt crisis" is not a major issue unlike other Nations with huge foreign debt and interest."

You are right. Its worse! Because the dept is in the hands of the people. Everyone taking out 20 year mortgages every 20 years to build a new house. People taking out 6 year care loans every 6 years to buy a new car every 6 years. 60% of the young now go to college... taken out student loans. Nearly every person in Japan is in dept. That is FAR worse national foreign dept.

Ah_so:

So, if I have grasped this correctly, the government is spending tax payers' money to offset the damage done by raising the tax in the first place.

Why not reverse the tax rise?

You have to understand the fact that tax increase is permanent while stimulus spending is one-time only. The reason is that even though tax increase always depresses consumer spending, hurting economy, it is only temporary. Consumer spending comes back after a year or two when people stop feeling "paying higher tax." It eventually becomes just a matter of life as the sun rises every morning. That is the government idea behind it. They have data and take advantage of consumers forgetfulness. How many of you are still fuming about the previous tax hike?

Some of the funds would go toward measures previously announced, such as tax breaks for car purchases and shopping vouchers to help low-income households, the sources said.

But most of the funds will be wasted on public works spending supporting companies and individuals who are politically connected and support us, the LDP. Some of those companies and individuals will of course have to pay back the political establishment in time-honored traditions such as by entertaining us at lavish restaurants, offering us cushy jobs and contributing to our election fundraising so that we can stay in power.

They ought to use some of the stimulus to incentivise young urban dwellers to move back to rural areas and get involved in agriculture, and promote farm-to-table restaurant culture and whatnot so that a more diversified economy can develop alongside. 'CoolBiz' seemed to work, have a similar push on large business to allow remote working. There are lots of tech and other service jobs that could just as easily be done from a broadband Internet connection in Akita or Ehime as they could in Tokyo. Subsidize the thermal insulation and installation of central heating in associated rural housing stock so that such a move is more attractive and simultaneously energy-efficient.

Might as well kill two birds with one stone. If you're gonna dump $100 billion dollars into the economy, use it to help reverse the cultural desertification of the Japanese heartlands.

The fact that Japanese are not repopulating due to financial woes shows just how stressed Japan is.

The politicians in Tokyo don’t care about other areas other than Tokyo and it shows in the overall decline here.

Raising taxes will just cause more problems......

Yeah just borrow more money like it's the 1980s boom era, cause we do not have enough debut as is.

Throw more oil to the fire..

All that borrowed money will go under the table to corrupt got officials, including Abe, the jokes on you..

stepoutsidethebox:

Nearly every person in Japan is in dept. That is FAR worse national foreign dept.

Not really. Japan has actually one of the smallest household debt among developed countries.

See: https://tradingeconomics.com/country-list/households-debt-to-gdp

One major reason is perhaps related to government deficits.

[T]he main reason the Japanese have managed to support their economy and at the same time avoid rising household debt has been a willingness to run government deficits. 

See: https://medium.com/@renegadeinc/household-debt-a-tale-of-three-countries-892224e7a590

Prime Minister Shinzo Abe has already said he will exempt food and some daily goods from the tax hike to soften the blow, but there is still a lot of concern that the tax hike will wreck consumer spending and sentiment, the sources say.

It’s too little merit and too complex to stay 8% of some daily foods and goods against 10, that’s only 2%.

All are 10%.

Some dailies are Tax Free, the others are 10. This systems are easily understood.

What’s the purpose of consumer Tax increase??

Simple is best!!

Take that 10 trillion yen and divide it among 126,000 Japanese, each gettin about one million yen each. That will stimulate the economy.

$87billion. Half will be used for “administration” purposes.

kurisupisu:

The fact that Japanese are not repopulating due to financial woes

No. Japanese birth rate started sharply declining in early 70's, in the midst of economic rise.

https://en.wikipedia.org/wiki/Demography_of_Japan

In fact, the relationship between fertility and income is quite clear: the poorer you are, the more babies you reproduce.

https://www.stlouisfed.org/on-the-economy/2016/december/link-fertility-income

Complete and utter waste of time. They'll give it to their construction buddies like they did last time. Didn't help a single household.

If the government is so keen about offsetting negative effects of the planned consumption tax hike, they shouldn’t raise it in the first place.

@insane Wayne, I don't know where you get the impression that tourists don't pay sales tax, because you're wrong. It's only a small percentage of tourists that use the tax-free shops in Japan. Most tourists on middle-income budgets, like me, pay the price of whatever it is, wherever we go. Get off your high horse

Most tourists don't pay sales tax for non convenience store items. As a tourist, show your passport in some places, and you will not be charged for tax. You don't know this?

Seems to me that you're the one sitting on your high horse.

I hope Reuters realizes that almost all of Japan's public debt is held by Japanese IN Japan. Money can be printed if and when the creditors call in the debt. So, the "debt crisis" is not a major issue unlike other Nations with huge foreign debt and interest.

So you won't mind one bit if I come over and take a few million yen from you to use for shopping!

I remember when the tax was 3%... and then raised to 5%, back then the IMF wrote the following which still is relevant:

https://www.imf.org/external/pubs/ft/sdn/2011/sdn1113.pdf

However, over the years, I haven't really seen a rise in income, and indeed the jobs on offer today appear to offer the same level of pay as those back in 1996... this is regardless to what the Economists try and tell us about wage growth:

https://www.bloomberg.com/news/articles/2018-06-06/japan-wage-growth-falls-back-to-trend-in-april-after-march-surge

Of course, when you include the Bonuses you can paint a different picture (assuming you get a Bonus, and assuming of course your Company can afford to/wants to increase it for you):

https://www.reuters.com/article/us-japan-economy-spending/japan-wage-growth-hits-21-year-high-signals-pickup-in-household-spending-idUSKBN1KR2GY

Temporary or Contract workers don't get Bonuses....so are excluded from these statistics.

So, there will be an impact upon many with this taxation rise, however it's inevitable, so shouganai...

The stupidity of the Japanese government is stunning.

@socrateos

I don’t think that the only reason Japanese are not having kids is economic but it is an important consideration.

After all, not being to support oneself on a meager salary,also means the idea of supporting others is not even a thought.....

Some going to get richer I can tell you !

Raising VAT is just a means for politicians to remain on a soft cushion and change nothing.

At the same time, it is a fair tax compare to many others (I did not like the "Fukishima" tax on my salary...)

I will give some people money once and take it from you regularly from now on.

thepersoniamnow, from now on ? Who is your teacher ? Shame and shame. Every Japanese has to pay the govt since the birth of life, that is the law.

Sounds like the kind of lunacy Kuroda might introduce to fail again. Japan is going to be in so much debt... and that is NOT going to get people spending more, no matter how much rich Conservatives tell the poor it is their "duty" to go out and spend for the nation.

At the debt to gdp ratio of 250, how many generations does it take to pay it off ? The impossible answer is 250 years, given that from now on Japan has to grow gdp by adding the current dgp to each and every following years, which is absolutely impossible. No Japanese can live that long, scientifically speaking.

I’ll be jumping ships soon methinks....

The tax will raise Y5.6 trillion, but the government plans to spend Y10 trillion, leaving the government worse off than before they raised the tax. It's complete lunacy.

Why don't they just raise the tax by 1% each year instead? Given that companies are making record profits and refuse to give pay rises to their staff, perhaps companies will absorb the extra 1% tax, instead of passing it on to the consumer.

Also, nobody buying a car should get any kind of tax break. If you can't afford a new car buy a second hand one. Better still, don't buy a car at all and save a small fortune.

Yeah, sure, another gift to Japan Inc.'s big firms.

Just keep don't care about taxpayers and middle-class workers 'cause, ehy, it's beneficial to those few people's paychecks.

I appreciate that they want to freeze the hike somehow, but it will never happen after frozen it twice up now.

But, you know, in order to earn more and more, the increase is somehow necessary and who pays? taxpayers, of course.

The ratio of debt to gdp of 250 is the gross ratio that includes debt between entities. If these internal debts are deducted the ratio is much lower. Apart from that the debt can be easily rolled over by issuing new debt to replace old debt. Also, why only compare debt to gdp? Apart from debt there are also government held assets that can be sold.

Well one thing is for sure, I am going to reduce my spending and also going to grow whatever I can, I am going to go full minimalist next year.

Tourists pay no sales tax because it increases consumption, but Japanese pay 10%

Tori’s then pay tax on hotels bills, meals etc. Likely the biggest part of their spending while in Japan. Yes, some goods are tax exempt, but those are for export.

that should have read tourists.