Abe says he will hike sales tax in Oct 2019 unless emergency occurs

@fxgai

Thanks for the reply. Food for thought. I'm sure we can take it up again on a different thread.

albaleo, thanks for the fair response. 

I do struggle to think of a case where the free market has really failed to provide me with what I want, when and where I want it. After the 3/11 earthquake I recall struggling to find milk and bread for a few days due to supply chain interruptions, but that's about the only example I can think of. I typically always have food, clothes, internet connectivity, gardening services, etc, all manner of things provided to me by the magic of the free market. I suspect that this is true of every person consuming those products across Japan.

But it is not hard to think of cases where publicly provided services have led to disatisfaction and the consumer has limited options to get service elsewhere. So I'd be happy for the free market alternative to be given a shot. The worst that can happen is that the free market fails worse where public service is currently failing, and we go back again. But it may be that the free market - which is just people across the country - actually works better.

Definitely there would be debate about the level of support for the needy.

But I see myself as "middle-class". I look at how much tax I pay, then think about what I could provide for myself and family were I able to spend say another 50~75% of it directly myself. I think most middle class people would be in this camp (those who wouldn't, would probably meet my idea of "needy"). 

So I am happy to keep paying some portion of my taxes to assist the needy and for essential public services, but it makes no sense to me that I pay tax, and my (wealthier) neighbour pays tax, and the tax is spent back on providing certain public services to my and my neighbour's households. We could have just spent our money on procuring services for ourselves directly from the free market instead. The improved efficiency of spending when we just spent it ourselves would leave a greater portion of taxes available to assist the needy.

In Japan, I'd say public housing, education, maritime ports, public highways, the Shinkansen, vaccinations, cheap school meals, restrictions on where you can build chemical plants (i.e. not in your back garden), water supply, sewage treatment, and flight path restrictions are just a few of the things that wouldn't have been managed better by completely private operations.

I've no objection to government making restrictions on things, as making regulations is a valid role of government. It's a governing function, rather than a provision of a service or good. 

As for the others, there are some interesting ones. The Shinkansen is nice, but free market airline competitors offer cheaper and faster ways to travel longer distances (depending on the destination). School meals here have recently been in the news for the wrong reasons (kids not eating due to quality issues). I am not convinced education in general is best provided by government tax and spend. I went through public schools myself, and it was OK, but I recall how when I went to college/university my Japanese language grades for one thing improved vastly. I believe it was because the quality of teaching was just better.

The Toyosu fish market debacle led me to investigate differences between here and overseas, and I found that markets are often privately operated by companies in other lands. Yet here the local government is mandated to operate them.

So, upping consumption tax to 10% is no biggie any more if done properly. 

It is a huge biggie. Japan instituted the 5% consumption tax in 1995, which immediately triggered a recession. The economy has never recovered. 18 bought of stimulus since 1995 to try to get the economy moving again have failed, the cost of these stimulus programs and the decrease in consumption have negated the additional revenue the tax was intended to bring in.

What few people fail to take notice of is that in the long run, the increase in the tax, though it increases revenue, does so at the cost of decreasing consumption. And when you add the trillions of yen spend to "stimulate" the economy to counter the negative economic effect of the tax increase, not only is the increase in revenue negated, in the end, the decreased level of economic activity costs more than the additional tax revenue gained.

Abe and the government of course want to pass the tax, because when they do so, they will decide who gets the stimulus money which goes along with it, the main beneficiaries being themselves and their friends. None of us will get a single yen of this money, though we will all have to pay the higher tax.

@fxgai,

I perhaps wrongly equated your views with some earlier views. Apologies.

However, I think it's wishful thinking to believe that the free market can deliver all services effectively.

You say you are in favor of support for "the needy". But no two people are likely to agree on who the needy are, and what kind of support they should get. That's part of what politics should be about. I suspect we'll both agree that politics in Japan is lacking in that respect - no effective political competition.

At what time since the 19th century did government become such brilliant service providers, that we should be loath to trust free market completion over life time bureaucrats?

Is that question focused on Japan, or more generally? Anyway, from a UK perspective, my parents told be that the creation of the National Health Service was the biggest change in their lives. And they'd just lived through a war. In Japan, I'd say public housing, education, maritime ports, public highways, the Shinkansen, vaccinations, cheap school meals, restrictions on where you can build chemical plants (i.e. not in your back garden), water supply, sewage treatment, and flight path restrictions are just a few of the things that wouldn't have been managed better by completely private operations.

I agree about the potatoes. Not so sure about the fish market. Which brings me back to the need for a better political setup in Japan where different opinions can be measured more effectively.

(I used to be a local government employee. I did it for about two years, but I couldn't stand it. I've been effectively self-employed since then. But I still support the need for strong public services.)

albaleo, I can live with roads to the extent that individuals can't buy or rent a road and they help transport stuff around the economy. Not killing the budget.

But generally, for services provided directly to you and your family, do you think some one-size-fits all option on devised by a bunch of bureaucrats who get paid regardless of your satisfaction is superior in the 21st century to what you might choose for yourself, spending your own money directly in your own interests?

If yes, which the low self-confidence? You choose what food you put in your own body right? Why the faith in the bureaucrats? Have you met them to be able to trust them so?

I come back to my personal example of public child care service. I pay tax - plenty. I get inadequate service in return.

Any normal operator that provided that level of dissatisfaction for money wouldn't even get off the ground in the first instance.

Another - the Tokyo fish market debacle. Why is the government operating a massive fish market at all?

Why are they controlling the supplies of potatoes in Japan?

At what time since the 19th century did government become such brilliant service providers, that we should be loath to trust free market completion over life time bureaucrats?

I stress again, that I favor support for the needy. But service provision from the competitive free markets, not bureaucrats.

What truly hurts with tax increases is the rounding up of prices/adjustment on top of the increase.

Many businesses use it as a chance to adjust prices and/or reduce quantities.

8% tax up to 10% tax is a 25% increase in tax, not a 25% increase in prices, or even 10%. Actual prices would go up by a factor of almost exactly one fiftieth - 0.2%

So, upping consumption tax to 10% is no biggie any more if done properly.

What is of concern is the criminal stupidity or fundamental greed of businesses which will mistakenly (?) increase prices by 10% on what they are now with tax - as happened when it went from 5% to 8%.

Government should be only police, armed forces and emergency services. 

Why those services in particular, and not, for example, roads?

Far better it would be if government stopped taxing people and paying bureaucrats to oversee the provision of inadequate services to the public, and let us people spend their our own money directly on our own behalf, in a way that we see fit, on services that are adequate for each of our own individual needs and requirements.

Right, because the 19th century was so much better.

Peter K for Prime Minister. Amen, comrade.

Why people think it must be government that operates the provision of any specific consumer facing service is impossible to understand.

Far better it would be if government stopped taxing people and paying bureaucrats to oversee the provision of inadequate services to the public, and let us people spend their our own money directly on our own behalf, in a way that we see fit, on services that are adequate for each of our own individual needs and requirements.

Government permits us to buy on our own behalf such basic things as food (except for the stuff which it controls imports of, to the detriment of consumers), so why should other services be any different?

The only thing I would say that I am happy to pay some tax to help out the needy, to make sure that the needy have sufficient means to be able to purchase adequate services (health insurance, education for the kids, or services in case of family members with disabilities, etc). But service provision should come from the free market, not the government.

Japan could totally transform itself and eliminate the budget deficits easily if such structural reforms were undertaken. Everyone would be better off as a result, even the bureaucrats who had to seek out more meaningful employment in the free market.

Bravo @sangetsu03 bravo! Spending other people's money, especially other people you don't know at all is just too easy for the politicians.

If something is profitable, private company will do the business instead of government companies. 

What you fail to realize is that government is a business. It is the most lucrative business which exists in the world today. In the government you can earn profits regardless of the economy, in fact, the worse the economy is, the more profits you can make. And there is no risk whatsoever, because the money you spend to earn your returns isn't even yours, it belongs to the taxpayers. You can spend every cent or yen you collect from the taxpayers each year, and if that isn't enough, you can borrow as much as you need, with no limit whatsoever. You can lower the interest rates to suit your own needs, set your own repayment terms, and, if that isn't enough, you can simply have your central bank print out more money.

In the business of government, there is no rule against monopolies. You can monopolize healthcare, education infrastructure, defense, and control the licensing of all professions. And as you have monopolies on all of these things, you can choose whom you want to do the building, the designing, and other work. In exchange for your choice, you get a healthy cut in return from whatever amount of the taxpayers' money you award these contractors.

Since, in the business of government, you make the laws, you can use your legislative power to coerce money from companies and industries to support you. If they help you, they get a tax break, or a fat contract, if they don't help you, you can raise their tax rate, or create regulations which reduce their profits. You can use taxpayers' money to bail out companies which fund your campaign, or give executive jobs to your friends and family, or you can deny bailouts to those who refuse to do these things.

In the business of government, you can buy the votes of the taxpayers using the taxpayers' own money. You can promise them healthcare, education, pensions and other services in order to get their votes, and then charge them more than they would have paid for these things more cheaply themselves. It's brilliant.

If you want to join the ranks of the rich, but without having to risk your own capital, or go through the hard work necessary to start a profitable business or company, all you need to do is run for public office.

Lower the corporate tax, discontinue income tax, lower bureaucracy (how many public servants are in Japan vs 50 years ago when there was no computers, internet, mobiles, etc), stop subsidizing so many non profitable enterprises (so called new energy, inefficient farming, roads to nowhere) and lower red tape. If something is profitable, private company will do the business instead of government companies. Government should be only police, armed forces and emergency services. In the long term, even health service should be private to avoid people going to doctor to cure every simple and stupid illness like cold or headache. Let people be responsible for their actions and activities, not rely on government and taxes for everything.

Bingo! 100% on the point!! Excellent!

Lower the corporate tax, discontinue income tax, lower bureaucracy (how many public servants are in Japan vs 50 years ago when there was no computers, internet, mobiles, etc), stop subsidizing so many non profitable enterprises (so called new energy, inefficient farming, roads to nowhere) and lower red tape. If something is profitable, private company will do the business instead of government companies. Government should be only police, armed forces and emergency services. In the long term, even health service should be private to avoid people going to doctor to cure every simple and stupid illness like cold or headache. Let people be responsible for their actions and activities, not rely on government and taxes for everything.

major financial crisis or earthquake occurs.

earthquake is coming and Japanese are the biggest gamblers in the world. Surely increase tax for earthquake insurance only, not more army, police and corruption.

How many times have we heard nonsense about this sales tax hike?

Scrote, I think that's the logic by which Abe claims it is necessary to get a new mandate from the voters.

I think Koike's new party is going to run on canning the tax hike. Not sure what her plan to deal with the debt is though.

If lying Abe isn't going to use the extra consumption tax revenue to reduce the deficit then he should not increase the tax at all. Instead of frittering the money away on wasteful projects run by his crooked mates he should let the people keep the money and spend it how they wish.

Government spending is up, so naturally we gotta foot the bill.

it's obvious he doesn't realize that raising taxes is a huge negative in this economy!

oh I think he does but it's the governments out of control spending that is the root cause. Taxes wouldn't need to go up if they weren't spending like drunken sailors.

the government was to use a large portion of the around 5 trillion yen in increased revenue from the tax hike to repay debt

Bogus. The government runs massive budget deficits, adding tens of trillions of yen in debt each year.

There would be no reduction in debt even if the entirety of the additional revenue were used for such purposes.

This alone shows the magnitude of Japan's fiscal problems.

Stop using taxpayers money for tourist and you won't have to raise taxes on an already expensive country (for taxpayers).

Emergency... in Abe's eyes that is losing an election.

I am rather surprised that Abe is making this announcement now, prior to the election, as this is going to cost his party a bunch of votes.

Then on the other hand, if he doesn't implement the tax hike, as he has already delayed it twice, folks will hit him for bringing it up in the first place.

Which means, in the long run, that Abe doesnt give a rats-butt about what the people think about him or the tax hike anyway. And it's obvious he doesn't realize that raising taxes is a huge negative in this economy!