politics

Abe sticks to plan to hike consumption tax in October 2019

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well your negative approval ratings can't get any worse and you have allowed price hikes in butter, frozen goods, dairy products, meat and vegetables all in the last two years so why not milk the consumers until they can't buy anything?

14 ( +15 / -1 )

I've never understood why taxes jump rather than being slowly migrated to the desired level with quarterly changes over 1-2 yrs. It would be less of a shock to the economy and allow everyone to slowly get used to the new levels, adjusting business as needed.

When I first read "consumption tax", I thought it was a health tax on the sick. Consumption is another name for Tuberculosis.

-5 ( +2 / -7 )

so the extra will go to the army?

7 ( +8 / -1 )

Any future tax increases will need to be considerably more flexible than the capture all, brute force rudimentary grabbing effect that the proposed two percent rise on consumption.

The ruling LDP government will need to consider a series of 'windfall taxes' on companies hoarding preventing past so called 1st & 2nd arrow monetary easing and portfolio re-balancing programmes from reaching their intended target, so an across the board, bluntly stated 'use it or lose it' policy.

Small to medium sized business vital for future economic growth could benefit from direct tax exceptions , deferrals or credit concessions.  

In fact at the same time review all aspect of employment including contractual obligation. Companies are being forced to retain staff that stubbornly refuse to undertake retraining and change programmes.

There is a whole host of 3rd arrow pledges and promises that have never been implemented in agriculture, direct and indirect employment,  education, and sector driven economic support subsidies that could kick start local economic revitalization initiatives.

3 ( +4 / -1 )

Of course he is trying to push this through before the Olympics in an attempt to cash-in on visitor's spending, which will have some benefits. However, once the dust of the Olympics has settled this tax hike will result in a huge decline in consumer spending (again). The first tax hike of 3% resulted in a drop in consumer spending of 10-25% depending on the sector. The second hike will have a much more drastic effect in the first 2 or 4 years after the Olympics. Abe's economic policies will result in the middle class disappearing. There will only be two classes, upper and lower (us and them), as it was 2-300 years ago.

11 ( +12 / -1 )

he will urge the business community to use retained earnings for raising wages

If it were your money, would you give it away in the hope that it might miraculously lead to a stronger consumer led recovery in Japan?

I personally invest my excess cash overseas, and I can't blame Japanese businesses for thinking that's the best use for the money too.

Abe needs to stop wishing and actually make Japan an attractive investment location, by slashing ridiculous regulations, and stop spending money so poorly to inspire more hope amongst consumers.

7 ( +8 / -1 )

Not one mention of curtailing waistful government spending, having transparent contracting practices slimming the bloated public services. Reducing reprentation in line with population decline...NO raise taxes. Poverty rates can only escalate as wages stagnate and the price of goods rise.

8 ( +8 / -0 )

That's it for his economic policy. What are these oyaji going to do as the population falls? Stop spending? Ha

5 ( +5 / -0 )

If you think about it, this is what is paying for the Tokyo Olympics (with the massive cost overruns and all). Those who benefit ? Construction companies and a % of businesses. Great deal for them.

5 ( +6 / -1 )

If the tax is not increased in 2019, it will never be increased. Abe is counting on two things, an Olympic's driven boost to the economy (somewhat deflecting the harsh downturn the tax would cause), and the fact that he will probably have retired from politics by the end of 2020, or sooner. The economy cannot stand an increase now, which says loads about the effectiveness of Abenomics, and it's not likely to be any better next year.

His reasoning is obvious, and also his prospects on Japan's post-Olympics economy.

Japan doesn't need higher taxes, it needs much lower state spending. But as politicians and their friends are the main beneficiaries of this spending, it will not be reduced.

9 ( +9 / -0 )

When Abe first raised the consumption tax, he lowered corporate tax. If he still does not have enough money why not raise corporate tax to its previous level?

3 ( +4 / -1 )

I still don't think Abe will raise the tax: he always shirks difficult decisions. Perhaps he doesn't expect to be PM in 2019.

2 ( +2 / -0 )

The ruling LDP government will need to consider a series of 'windfall taxes' on companies hoarding preventing past so called 1st & 2nd arrow monetary easing and portfolio re-balancing programmes from reaching their intended target, so an across the board, bluntly stated 'use it or lose it' policy.

Except that no Japanese company has earned any "windfall" profits, have they? With GDP hovering at around 1% since Abe took office, and worldwide growth being nearly the same low level, what "windfall" could there be?

No Japanese company has earned any record profits from manufacturing and sales, what they ave earned are fat market caps and capital gains. Overlooked is the fact that in order to earn these gains, and pump up stock prices, Japanese companies and the government have borrowed money. Where do you think all that money printed out by the BOJ goes?

If you were to subtract Japan Inc's accumulated debts from any cash they happen to be hoarding right now, you would end up with a deeply negative number.

Please take the time to look at Japan Inc's financials for the last decade, or, better yet, to 1992. You'll find that in most years there were heavy losses, in some years there were spectacular losses. The gains that they have made since Abe turned on the BOJ's tap come nowhere close to paying down these debts. The "record profits" enjoyed by Panasonic in 2013 would have to be repeated for 20 years just to cover their losses from 2006 to 2011.

Try to use a little common sense. No company sits on cash if they can help it. Cash which is not used might just as well not exist.

Lastly, if, for the sake of argument, Japan Inc is sitting on cash and hoarding it, it is their money, and they are free to do what they want with it.

Japanese companies are holding more debt than cash. In case you are unaware, Japan Inc derives 60% of it's sales domestically. No Japanese car maker has earned a profit in the Japanese domestic market for how many years now? No Japanese electronics producer has earned a profit on domestic sales either. Any profits earned on exports are often negated by losses in domestic sales.

The moment the government were to introduce a tax like the kind you mentioned would be the moment the Japanese economy collapsed. It is nothing but a house of cards propped up by massive amounts of debt, and much of the public debt held by the state (two-and-a-half times GDP) was incurred to prop up this house of cards.

5 ( +6 / -1 )

Tax on consumers to go up in October 2019 in order to ... reduce consumption?

Until, of course, August, 2019 when Abe changes his mind and promises to raise the tax in June, 2020, just in time to "gouge the foreigners" who come to the Olympics.

3 ( +4 / -1 )

Why not just raise the tax by 5% every 3 months. And when each increase does nothing, you can just keep raising it the following 3 month mark until you reach 100%. And if that doesn't work...

4 ( +5 / -1 )

This won't make that much money off the Olympics because lots of tourist spending is tax free. Instead of just luxury stores like days gone by, there are now "tax free" signs all over Uniqlo. Tourists can even get the tax back for 5000 yen of groceries. That's four bentos, some snacks and a six pack of beer. At 10%, those items will cost residents 500 yen more. Its a ludicrous situation.

With food spending such a high % of household income in Japan, the consumption tax has to be taken off produce. I think it is outrageous. Tax people for eating out by all means, but don't charge them for shopping in the supermarket. Japan's restrictive policies and support of the stubbornly inefficient agricultural sector cost ordinary people enough already for their food bill.

I think taxes in Japan are generally low and the rules on offtakes like depreciation are generous. Many self-employed people get away with paying very little if they know what they are doing. This leaves consumption tax as an easy way for the government to get money in to pay for services. Without it, the national debt will only skyrocket further. Consumption tax is naturally regressive though, hitting the poor hardest because they spend their entire income. This makes it necessary to exempt essentials to keep the system fair.

8 ( +9 / -1 )

Stupid is as stupid does. This epitomizes the very essence of insanity. Repeating the same thing all the while expecting a different result.

8 ( +9 / -1 )

Hi sangetsu03,  Corporate  cash deposits rose to over 240 trillion yen in the quarter ending December 2016 alone. These are not profits they are the returns of a  portfolio re-balancing experiment for want of a better description at the behest of to Bank of Japan. The question remains, is the sovereign debt being monetized?                  

Non-regular workers now account for about 47 percent of the labour market.  No level of tax or economic gains can be achieved  with this level of job security. Importantly for small or medium sized to retain their workforce after the cost of training new employees . Tax increase will need to be pin point focused. The mobility of the workforce is increasing exponentially across every sector. In the agricultural sector employee turn abroad in Kochi is six weeks. Although I question the maths on that but theoretically it is difficult to argue the numbers.    

There is a quantifiable difference to the ownership structure of corporate Japan and the performance of the top 100 taking into account the influence  banking ownership methodology has over how future investment decision are made.

 For a start these banks have a undue influence over this methodology. Look at the break down in the relationship been Toshiba and Western Digital festering  in the areas of corporate governance.

The opportunity to raise consumption tax  should have been taken in the first instance, far too late now.  The debt is accumulating within defined areas of the banking sector that are reluctant to wind poorly performing business interests up.  

Windfall taxes don't have to be implemented in the manner that implies there political insinuation. It is a question of achieving compromise

1 ( +1 / -0 )

Overseas investment is included in the so-called hoards of company cash, so the idea that it is cash just sitting around is not true. It's not doing anything in Japan, granted, it's put to work overseas. But that doesn't mean it is ripe to be handed out in wage hikes at all.

I disagree that consumption tax should be removed from this or that product. The purpose of consumption tax is to efficiently collect tax while imposing minimal distortion on economic behavior. Look at what happened with beer tax here - distortion galore with all the third beers.

To ensure fairness in society is what the social welfare programmes are for. I do think the government should spend less on richer people (me included) so that it can afford to pay more to assist the poor.

The best way to help the poor though is putting a rocket under the economy with seeping reforms.

4 ( +5 / -1 )

before the next snap election, we will be offered a 10000yen present to help the economy by spending it on yakiniku. already summer bonus are down. 1 in 6 children on the poverty line. raising it to 10% will be devastating to many households and become a nightmare for small business to change the prices on all their products, update website etc.

the only good point is that it is much easier to figure out how much an actual price is at 10% than 8%. every day i feel like i am doing a maths test.

4 ( +4 / -0 )

Hi fxgai, yes that has to be taken into consideration overseas returns, and acquisitions muddy the economic landscape furture.

If no compromise can be found there is the prospect of a consumption tax hike having to be implemented in 2018 of at least one percentage point. Plus a future point two five in 2019.

There many need to be a review of government spending commitments as early as end 2017. You see Abe san talks about budgets being balanced which actually makes sound economic sense, but is reluctant to fully acknowledge how or when this is politically achievable.

1 ( +1 / -0 )

The introduction of GST at 6% had actually burdened the people in some countries. 10% in this recession economy is income to the government but bad for the people.

3 ( +3 / -0 )

When prices go up, salaries remain the same than consumption goes down and tax revenue goes down too.

5 ( +5 / -0 )

@ghost rider. i never met you but you are smarter than all politicians in japan for 22 years.

4 ( +4 / -0 )

And he's expecting to stay in power until then? His egomania makes me sick!!

3 ( +3 / -0 )

...raise the consumption tax from the current 8% to 10% in October 2019 as part of efforts to restore Japan's fiscal health.

Why not stop spending money you don't have instead?

6 ( +6 / -0 )

Since it's more than 2 years away,I'd hardly hold my breathe expecting him to do.If he were going to do,he should have when he promised to, to the dimwit Noda.The only way he'll do it is if his cherished dream of changing the constitution is enacted.If that doesn't happen,he will not put up,except in spite, before quitting as p.m.

0 ( +0 / -0 )

How about get rid of consumption tax completely? Cut or change corporate income tax (see my comments about ratio-pay tax) to get more businesses to move to Japan, get rid of property tax which is a rent to the govt, and charge only income tax.

2 ( +2 / -0 )

Better plan: TAX THE RICH!!

1 ( +2 / -1 )

Abe will be gone before then and hopefully his pathetic three failure economics policies. Raising tax has one effect, a reduction in spending. Such reductions in spending in a consumer based economy actually reduce tax revenue. Reduce taxation and the opposite happens but World leaders seem to stupid to understand that, best and brightest? No, idiots who could never cut it in industry go into politics.

2 ( +2 / -0 )

Yes let's put Abe on a 1 year contract at 800 yen an hour so that he can experience the real world. These old gits are so out of touch with the reality of the daily lives of ordinary people. Let him then "enjoy" a 10% consumption tax.

2 ( +2 / -0 )

How will this help the economy if wages are not rising? People cannot spend what they do not have.

3 ( +3 / -0 )

ストップザ消費税!Must be a lot of conservatives commenting here. Everyone is against a tax.

0 ( +1 / -1 )

Regarding tax revenues, I did a fact check and found that versus 5 years ago (arbitrarily chosen for comparison) Japan's budgeted tax revenues have increased from 42 trillion yen to 57 trillion yen, and about 7 trillion of the increase appears to come from consumption tax revenues. (Corporate tax revenues are also up around 4 trillion.)

At a glance, it doesn't appear to be the case that increasing the consumption tax, which is currently broad-based with a low rate, leads to a reduction in tax revenues. Indeed, it's virtually impossible for consumers to avoid paying consumption tax, unless they actually stop consuming, or reduce consuming. But to the extent that consumption has reduced has a result of the hike to 8%, it hasn't led to a decline in consumption tax revenues (nor corporate tax revenues).

However, the government has been talking of adding various exemptions to the consumption tax hike when it is raised to "10%". That's going to be a mess and the tax revenues will probably fall short as a result, because politicians and bereaucrats will fail to accurately grasp the distortionary effects of having different tax rates on different types of product.

So, I am in favour of consumption tax when it is implemented in a broad-based (no exemptions), low rate manner. Not (much) higher than 10% should be the limit.

The rest of the fixes for Japan's broken public finances should come from spending reforms. How many tax payers in Japan have looked at their tax withdrawal certificate and understood just how much money is deducted from their annual salary each year? For those who have, have you they thought about what they could do for themselves if they were allowed to keep that extra money, in return for no longer being able to receive various publicly funded "services"? I think most people in Japan could make their own arrangements adequately, if only the government let them keep their own money. I also think that people will spend their own money on themselves far better than the government bereaucrats are capable of doing on everyone's behalf. No more public money scandals like we've seen recently under Abe for sure.

And also with income tax gone, the consumption tax revenues should be funneled to the needy people who can't for whatever reasons take care of themselves financially.

2 ( +2 / -0 )

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