Abe to delay sales tax hike over economy fears: Nikkei

I agree on the consumption tax. Income tax punishes people for working, producing and earning money, which isn't smart.

Without people working, producing and earning money, there can be no consumption. We want as much work, production and earning money as we can get in this economy with a shrinking population.

Some people argue that consumption tax is unfair to those on lower incomes, and viewed in isolation it may seem that way. But people who don't even have a job don't have it good in any case, and are going to need assistance.

On the other hand, the biggest consumers are the rich, the wealthy. The higher consumption tax is, they more they pay. They can't take much of their consumption to some offshore tax haven to avoid paying consumption tax either.

Abe was going to ruin the consumption tax by making it all complex with multiple rates here in Japan as well, so from that perspective it's good news that he's likely to cancel the hike for now.

Hopefully the next person to raise it does so with a lot of other reforms that, overall, will boost economic growth while assisting those in need. The higher economic growth Japan gets, the better off those currently struggling on low or no incomes will be. Economic growth is the better solution, rather than tax and redistribute as the economy sinks.

A consumption type tax is the most fair tax. Raise the minimum wage and people will be able to pay that extra bit of tax without hurting.

New election anybody?

domtoidi,

So you want to raise taxes?

I think people want the government to get the books in order, somehow, as part of a broader strategy to make Japan great again.

In the absence of massive economic growth, or massive public spending cuts, tax rate hikes have to be one element of an optimal solution, but of course it's not going to be a cake walk.

You can also cut taxes and raise spending...

That doesn't seem to be a realistic solution in Japan's case, it's more likely to keep making Japan's problems worse.

How about everyone pays the same percentage?

I agree with you on this one, but Japan needs lots more than just tax reform to boost economic growth.

katsu78,

Who owns Japan's debt and who suffers the consequences if Japan can't pay it?

Increasingly, the central bank owns the debt as "assets" on its balance sheet. On the other side of its balance sheet it issues yen as liabilities. To the extent the central bank can keep the bond market over-inflated, and the currency does not crash in value, things could be fine for a time. But everyone will suffer the consequences, should a negative outcome indeed come to pass. (The degree to which everyone suffers will depend on their individual circumstances.)

If this huge cloud weren't hanging over the nations' consumers, confidence in the future might be higher than it is. JMHO.

Not necessarily

You know you've got it right when your posts get voted down.

For once Abe has done something I agree with. Postpone it indefinitely. When has a tax hike ever helped the economy?

Accounts to February has the Japanese central bank ownership at around 34% (ish) of the J bond market and will reach at least 45% by first quarter 2017.

Haruhiko Kuroda quantitative easing has in essence accounted for the proportion of the budget deficit, a fiscal crisis is being averted by arrow one of Abenomics as the big insurance companies and pension funds exit the market. Any rapid change in the debt dynamics of the third largest economy will be profound ..........

Spelt out at least a $8trillion public debt default, add to this between $7 trillion debt traded at negative yields.... factor in Europe Portugal public debt is 120%, Italy 131% + of GDP etc. Globally another dive for cover and close the hatch time.

Spending financed with equity, funny money or bonds is irrelevant if interest rates remain at zero.

Abe san must call in all the favors to his country’s business groups to raise wages and halt Japan’s deflationary abyss, take hostages if necessary . One example is Toyota, a monthly wage rise of just around ¥1400, despite recording bumper profits $18.6bn in 2015, $2bn in cash.

Averaged out across whole sectors 60 million plus employees received just 0.21%. Greed with bells and whistles.

Abenomics first arrow is with hindsight the very definition of over kill. Raise wages by whatever means, and then increment the tax increases, my humble opinion.

David WagnerMAY. 15, 2016 - 08:51AM JST I'd be squirming if I were one of the millions of Japanese who own Japan's debt....

Honest question here: Who owns Japan's debt and who suffers the consequences if Japan can't pay it?

Because while I'd rather all governments honor their debts, I'm not going to shed that many tears if the people who have been supporting the Japanese governments' excesses all these years are the same people who find their bonds are worthless.

Today's NHK noon news, citing an influential LDP member, reported that the tax hike is on schedule.

domtoidiMAY. 15, 2016 - 11:23AM JST Next time you go out drinking with your buddies, tell them that the ones who earn more should pay more of the tab. See how that goes over. And tell you landlord that you should pay less because you earn less. And your phone bill should be less because you earn less.

That argument is pretty absurd. We agree to commercial pricing schemes because they charge us by the degree to which we use the product. I drink more, I pay more for my night at the bar. I use the phone more, I pay more on my monthly bill. I have a better apartment, I pay more rent.

It's far harder to quantify who uses government services. I mean, I don't drive much so I could try to make the BS claim I don't use roads so I shouldn't have to pay for them, but since I live in a city my entire lifestyle is dependent on other people using roads. I don't have children so I could try and make the BS argument that I shouldn't have to pay as much for public schools, but I directly benefit from living in an educated society where for example I don't have to wonder if the doctor treating my sinus infection understands the basic principles of evolution. I'm not poor so I don't receive poverty support, but I directly benefit from living in a society where people aren't generally so desperate for a way to get by that they break into my apartment and nick all my stuff.

Since we can't quantify who directly benefits the most from government services, the most rational way to pay for them is to look at who benefits the most from living in a society where those services are in place, and that's clearly the rich. Reasonable people can argue about what the precise ideal tax rate for the rich should be, but there is no rational argument against the rich benefiting the most from society, nor is there a rational argument against the fact that the rich are the most able to bear the cost of taxation. It is always better to be rich and taxed more than to be poor and taxed less.

Easing money policy which was started by the Governor of the Bank of Japan did not increase consumption or investment. Deflation cannot be ended by enlarging monetary base. What is short is not money but demand. Raising sales tax dampens consumption. Delaying it is a matter of course. All the opposition parties also oppose to the sales tax hike now, so it cannot be an issue for the election. What is weird, however, is the silence of the Finance Ministry. In addition to the above economic and political situations, it may be also due to the Cabinet Personnel Bureau which was set up by Abe (and Suga) with the aim to control the personnel affairs of high ranking officials of each ministry. Have the Finance Ministry capitulated to Abe who doesn’t seem to feel so guilty about fiscal finance (let BOJ buy up GBs) or are they just be playing possum?

Nothing new under the sun. As for those who wonder the wonder of wonders, "When will the masses rise up!?"

Remember all the praise given to the establishments supplying meals for neady children?

What was a term floating around, 'grass roots'?

@David Wagner

"I'd be squirming if I were one of the millions of Japanese who own Japan's debt...."

I wouldn't. Japan's debt is in a currency it has the authority to issue. The country can thus always meet its yen-based obligations, barring any political "sequester" type antics.

..."driving it's economy strangling debt."

How exactly is the fiscal debt "strangling" the economy? The one certain thing that does strangle economies is austerity in times of low private demand.

I'm here for the Yubaru arguments and general bickering.

But in all honesty, nothing we say here will have the least bit of influence on Japan.

My two cents: It sucks because the Japanese population is very meek by nature, so they'll basically go along with anything the government does. It's funny because they complain like crazy behind closed doors.

High earner, higher tax is the battle cry of the binbo. How is that fair? How about everyone pays the same percentage?

Next time you go out drinking with your buddies, tell them that the ones who earn more should pay more of the tab. See how that goes over.

And tell you landlord that you should pay less because you earn less. And your phone bill should be less because you earn less.

Good! Hope he sticks to it.

"Critics say Japan must increase tax revenues in the face of soaring debts and to pay for the ballooning cost of welfare as the population ages." Every time they raise it they say it is to pay for welfare, but every time the money goes on something else.

@Yubaru

I for one would really like to know when the people of this country are going to get fed up with the games he keeps playing with their lives and future?

A great comment. Please watch what will happen after the election. Violent and brutal crack down of peaceful protest against the new US base construction at Henoko, Okinawa.

You can also cut taxes and raise spending...

Because the highest debt per GDP of any developed country in the world just isn't high enough?

Japan has no good options because they refuse to cut spending on the social programs that are driving it's economy strangling debt. Whether they raise the tax or not is meaningless in the long run. They have repeatedly tried Keynesian government spending and still haven't figured out that they need to take their medicine. You cannot eliminate the pain from a failing economy with three decades of half measures. The inability to reform government in any significant way means Japan is doomed to a barely growing economy and an eroding standard of living.

Something that hardly anyone has mentioned here is that plan to change the minimum number of years required to receive a pension from 25 years to 10 years, which was supposed to materialize at the same time as a 10% consumption tax. The latter was delayed last October when the hike was only up to 8%. Now that it's been delayed again, I wonder whether the number of years needed for a pension will simply remain unchanged for the foreseeable future.

It is still unclear how long Abe, who first postponed the tax increase in November 2014, wants to put off the hike this time.

Delay, uncertainty and insensitive to consumer sentiments like death row inmates in Japan awaiting execution. It will do more harm than any good to govt coffers.

If sales tax reduce consumption like in other countries then go for income tax which is more fair. High earner higher tax.

Government coffers are deep in the red, with public debt standing at twice the size of the economy—the worst among industrialised economies.

I wonder how much this debt is effected by the constant misuse of public funds by unscrupulous politicians. Abe's platform for the first tax increase was to ease the public debt and support the failed welfare and pension system, but the money has not been used for it. He gave corporations tax cuts with no legislation to ensure the cuts were passed on as salary increases and increased the sales tax at the same time and then, he wonders why the economy slowed even further. He is relying on international markets that no longer belong to Japan to increase exports. In my opinion, he needs to increase import taxes and promote Japanese goods. He also needs to remove the price fixing of Japanese produce to make it cheaper than the imported goods. The only way to fix the economy is to make Japanese products cheaper so people will spend more, thus making the sales tax hikes mean something. The current statistics are, a sales tax increase of 3% resulted in a drop in consumer activity of up to 25% in some industries. Sadly, I fear the worst is yet to come for the Japanese economy and its not going to be pretty!

Last week the BoJ said no more monetary easing so the yen soared in value, so Aso had great concern about this. Now Abe says no tax hike. So whats going to happen tomorrow, the whole world and his dog including me is going to buy yen and the USD will be 100Y - $1 and all those tourists wont be able to afford to come here anymore.

The collective noun of wunch of bankers comes to mind.

I'd be squirming if I were one of the millions of Japanese who own Japan's debt....

Wise move. Another recession would be lose-lose, with the country ending up with less tax revenues despite higher taxes.

You can also cut taxes and raise spending...

So you want to raise taxes?

Raise taxes or cut spending. Pick your poison.

Flippityfloponomics!

If you're so sure about it Abe you would just do it, so either bite the bullet and do it or forget about it once and for all.

So you want to raise taxes?

Pre-election maneuver to save his own skin. Too bad the Japanese voters will fall for it.

Once again Abe is playing games prior to an election. He previously stated that unless there was a "major disaster" (just following the Kumamoto earthquakes) or economic reason, he was going through with the planned increase.

Kumamoto is without a doubt a major disaster, but it seems Abe cares very little for the people of Kyushu or Tohoku or Fukushima either for that matter, and all he cares about is keeping his place in power.

I for one would really like to know when the people of this country are going to get fed up with the games he keeps playing with their lives and future?

Abe is in deep doodoo. 5 years and no significant change except boosting tourism numbers with a weak yen which is gaining strength. Still too much red tape and wasteful systems hindering this economy.