Corporate Japan to save gains from tax cut in challenge to Abenomics

The country is bankrupt. Once interest rates rise - historically, Japan has average 4% interest on their bonds - its game over for the Japanese.

Companies to save the cash- ha ha ha, anyone could have told you that. Abe's nomics totally flawed and useless from the start. Japan is so totally screwed. And they still expect to be able to attract decent foreign, non-english teaching workers!

Is the Prime Minister in England elected the same way as in Japan? This is the flaw in the system. The people should elect their leader, not the cronies.

Business leaders love Abe who will always be supported by them since he lines their pockets while the workers suffer.

The Abe plan is completely working, following the US neo-economic model. With tax breaks and easy credit to big corporations and banksters, it was always intended as part of class warfare to transfer more wealth to the rich.

as expected....should have just given the tax cut to the people who work....

Our company is investing, adding employees and buying more stock/warehouse space. So there.

oh oh - maybe time for Mr Abe to head to Yasukuni to drum up some feel good factor.

Abe is no Thatcher that's for sure; she had balls.

Of course most companies will save the cash. People keep saying that Japan's corporate tax rate is high. which it is, but 70% of companies pay nothing at all. So the average corporate tax rate in Japan is actually very low, far lower than the global average of 24%. All Abe has done is give a tax reduction to 30% of companies (big business), but 70% are entirely unaffected. Only 10% of this 30% (3% of Japanese companies) are even considering passing this on. This is what Japan's state-controlled media refers to as a "stimulus measure" which is supposed to "offset" the fact that we are all going to ay an additional 3% on all our purchases from April next year, and another 2% on top of that the following year. As always with Abe, the figures do not add up.

Like we didn't know that was gonna happen. The corporations get richer and the working class gets the third arrow right up the coit! This will have disastrous effects on the economic growth, but these wombats don't care. If they think the economy is bad now, wait until the sales tax hike comes in along with all planned increases in health insurance, pension premiums and utity costs come into play. The phrase 'economic depression' springs to mind. It is gonna spell the end for many small businesses and unemployment and poverty are gonna soar! But, as long as 'corporate Japan' looks good on paper nothing else matters. Well, corporate Japan is also gonna suffer cos nobody will be able to afford to buy their shit!

Once again people are overlooking the most basic economic effect of taxation. This is that one cannot tax a particular class of people, and expect the effect of this tax to be felt only among this particular class. Any tax on any part of the economy is eventually shared by the entire economy.

If you raise the tax on top income earners by 10%, what happens? Since the top income earners are the main employers and service providers in any economy, they immediately compensate for the increased tax load by either increasing costs by 10%, or by reducing their costs (often by cutting labor) by 10%. This means that you are the one who ends up paying for this tax increase, not the top income earners.

Once again, there is no such thing as a tax on corporations or the wealthy that is not immediately passed on to the lower classes. A tax on any part of the economy is a tax on us all.

As for the article above, what exactly should the companies do with the few percent of tax they save? Some companies are still saddled with debt which they acquired back in the bubble era (Olympus is the main example, but is not the only one). The Japanese economy is facing a steep decline in population, increased competition from other countries in Asia, and the Japan itself is saddled with an incomprehensibly large public debt. Any company with half a brain would be hesitant to invest a single yen in Japan right now.

Abe has to release his third arrow, and quickly. But it's going to have to be more like a shell from a 20 inch gun to have any real effect.

So some companies are going to boost profits with their tax cuts?

One presumes some Suzuki Taro's have already bought some shares in those companies, and will not be concerned about the 3%-5% hike in consumption tax.

As for other Suzuki Taro's who are unwilling to play the cards that Abenomics has laid out, it's never too late to make efforts to adjust to the reality, which is what it is. Agree with it or not, one has a responsibility to oneself and one's family in these matters.

Good intentions, I suppose.

Give companies a tax cut to encourage higher salaries - but the companies won't play ball and employees have to make do while the cost of living increases.

The government passes a law aimed at making employment / society more stable: if a contract/haken employee does the same job for five years, s/he can if s/he likes request permanent employment in the company - but the companies won't play ball and are simply deciding to not renew such contracts after four years.

Companies are now looking at pushing out non-managers at the age of 50.

We read about that 63-year old who had to plug his rice cooker into a neighbour's outlet due to having his own electricity cut off. I wonder if he has to wait two more years to receive his pension. All of these contribute to the social time bomb that has already started ticking.

No surprise here. To bad the government doesn't just doesn't make this a tax break for companies that have increased their hiring--especially of full time workers (instead of an across the board tax cut).. I wonder if this wasn't by design all along though just to fool the public. Go ahead and thumb me down, but I hope those that do will at least offer a better idea or at least some insights as to what they may know is really going on.

Good intentions, I suppose

"The road to hell is paved with good intentions."

Japan is headed for an epic collapse, and there is nothing which can be done to avoid it. Abenomics is too little, thirty years too late. The current govenrment and companies will get while the getting is good, they have only 7 or 8 years before the bell sounds.

The entire government financing structure in Japan can only be tenable if the population is growing steadily. The pension system is essentially a great ponzi-scheme which can only be maintained if ever greater numbers of people can contribute to it. The tipping point was passed some years ago. Unfortunately, a huge number of people have believed in this system, and as a result, they have not saved much of their own money for retirement.

But even if they had, the currency system is not well managed, and those who saved as much money as they could may end up seeing it become valueless.

Japanese companies are going to cash in as much as possible, and use their cash elsewhere, as they should. The current system is too broken down to rely upon, and is only getting by on momentum. It will eventually come to a halt.

Peter PayneOct. 22, 2013 - 11:01AM JST

Our company is investing, adding employees and buying more stock/warehouse space. So there.

I'd hardly call your little otaku export company in the middle of nowhere as a true indicator of the health of the Japanese economy. I work in a Japanese company of 50,000 plus workers and we, like most Japanese companies are hurting.

Is the Prime Minister in England elected the same way as in Japan? This is the flaw in the system. The people should elect their leader, not the cronies.

If people in Japan elected their leaders directly we would have neo-fascists like Ishihara and Hashimoto occupying the highest elected position in the country, the two biggest cities seem to prove this.

The boat has already left and Japan is trying to get on board. 30 years ago was the time for Japan to use it's prosperity to build two way international links and attract foreign companies to Japan. Now corporate tax cuts will do nothing. Japan decided to follow a protectionist and insular path when it was perfectly placed really open up. Too late Japan. Internationalization in Japan has always been about corporate Japan selling it's products abroad but limiting what comes back.

"The tipping point was passed some years ago."

So why hasn't it tipped? Perhaps because your analysis is based on a whole lot of false assumptions?

D'oh!

" So why hasn't it tipped? Perhaps because your analysis is based on a whole lot of false assumptions?"

No, but because collapse comes slowly until it comes quickly, like: Argentina, Mexico, Greece, Rome, etc.

Soon you can add US, Japan, and EU to that list.

Tax cut for corporations, tax hike for the Japanese population.

Doling out a corporate tax break is nothing more than standard trickle down economic strategy — but very little of this extra corporate wealth is likely to actually find its way to the people under this Abenomics strategy, just like was the case with pretty much the same tactic under Reagonomics in the 1980s.

So why hasn't it tipped? Perhaps because your analysis is based on a whole lot of false assumptions?

The Titanic didn't sink in only a minute, but it was doomed the moment it hit the iceberg.

The tipping point occured when the population stopped growing. It was at this point that government should have enacted policy changes to adapt to the circumstances. Since there were obviously going to be less and less people contributing to the system, it would only be natural to reduce spending. If you get a pay cut at your job, do you continue to spend as you did before? Of course not.

But what did the government do? They certainly didn't reduce spending, did they? If they had made the hard choice to reduce spending, it would have caused some pain, and they likely would have been voted out of office and forced to earn an honest living like the rest of us. Instead, in order to hold onto their jobs and priviliges, they continued to spend as they had been.

In the past, many laws were passed to "protect" workers. More laws provided safety nets to the people. The intentions were good, but as with most well-intentioned projects, the results have been contrary to expectations. The worker protection laws did protect the workers, but at the cost of requiring companies to keep the bad workers as well as the good. It is quite difficult to fire a full-time worker in Japan, and all of you have heard how some of these workers simply sit in an office and do nothing all day. The cost of gettiing rid of them is more than that of keeping them, so they get paid for doing nothing. One of the results of having unproductive staff is that to compensate for their inactivity, more staff must be hired, but since the inactive workers have to be paid, the rest of the workers and new staff can't be paid as much. Existing staff must work longer hours, and wages are either reduced, or simply not increased.

In many companies the staff are all productive, but because business has been slow for several years, they end up getting their pay cut, as making people "redundant" is difficult and costly. These companies have been struggling for years in the red, hoping for growth to return.

Of course it won't return. The soil is much richer in other less-enlightened countries where companies can hire good workers and fire bad ones. And where the cost of "helpful" regulations has not outweighed the ability to earn a profit.

As for the public "safety" nets, these have made the people less safe, as the regulators who are entrusted with managing the system couldn't properly manage their children's weekly allowance. Less healthy people and retirees have been depending on a system which they have been paying into for their entire lives, but which has been grossly mismanaged, and which will likely be insolvent before you and and are able to take advantage of it. Had these safety nets not existed in the first place, most people would have no trouble providiing for their own "safety".

These two "helpful" points of public policy have burdened Japan with unproductive domestic companies, and saddled the country with a ludicrous amount of debt. These programs were styled as being helpful to the people, but they were tools designed to buy votes and create a culture of dependence.

And what else have our leaders done? They have embarked on wild stimulus programs to try to "jumpstart" the economy. Many trillions of yen are spent to obtain a few trillions of "growth". Most of this money is spent on overpriced public works projects which are fat with kickbacks, or trickled among the vested interests like JA and unions to buy more votes.

The system has doomed itself, as would any system which tries to promote "the common good" at the cost of the individual.

"The tipping point occurred when the population stopped growing."

Then you're using the wrong idiom. "Tip" is a sudden and fateful movement, not a slow, prolonged trend.

Time is relative, or so Einstein said. The economy works on a large scale where changes take place slowly, but the collapse is happening quickly enough, and will occur too quickly for most.

One of the problems is that there is no mobility in the job market in Japan. Mid-career hiring is far less common than in other countries. Bad workers CAN get fired in Japan, but it's harder to fire an average worker - but then again there are plenty of average workers in other countries too.

However, in other countries the employee can leave and blag a job somewhere else under the guise of "looking for a new challenge." If the job market were more flexible here then average workers wouldn't have to cling by their fingernails to stay put, and companies wouldn't have to resort to the demeaning practice of putting their employees' desks in corridors (which is pretty disgusting regardless).

A paper pushing position in General Affairs will always be required for companies of a certain size. Why is that average person not worth the dignity of a pension, health insurance and some measure of job stability? It's a permanent position, so give someone the permanent job and invest in some training if necessary.

@Peter Payne

But that's not really a representative sample, is it? I mean no disrespect - I think it's great that you run a successful company in Japan and I hope you continue to grow.

But the reality at many Japanese firms is not the same. When times are good they will pile up the cash, refusing to invest, hire or give pay rises. When times go bad, these are the first areas to be cut.

Doling out a corporate tax break is nothing more than standard trickle down economic strategy — but very little of this extra corporate wealth is likely to actually find its way to the people under this Abenomics strategy, just like was the case with pretty much the same tactic under Reagonomics in the 1980s.

But Reaganomics worked, didn't it? Do you remember 1980 in America? Do you remember double-digit inflation, and banks paying 15% interest on deposits? Do you remember long lines at the unemployment offices? Do you remember companies posting "We are not hiring!" signs outside their doors? Do you remember songs like Billy Joel's "Allentown"? These were the days of 1980 when the collective actions of LBJ, Nixon, and Carter were strangling America, and the rest of the world by extension.

Do you remember 1984? Unemployment was down, the economy was growing, the music was optimistic. Reagan was "liberal" in the old economic sense of the word, meaning that he valued individual liberty and economic freedom over the collective beliefs of the left, and the conservative nuts on the right. He believed that the success of a greater number of individuals would help to spread success and growth throughout the economy. Regarded by a dullard by the popular media and the left (to whom he was Satan personified) he shrewdly used a mix of free-market and Keynesian economic policies to manage the economy. Under the tough circumstances of the times, he was remarkably successful. Unfortunately, his actions have been ignored or demonized by those who disliked him (who were many) and most people today think of "Reaganomics" as a dirty word.

The great bad side to Reaganomics was that it started the precedent of large deficit-spending. This was more excusable at the time when growth, and the potential for growth were far greater than they are now.

As for the taxes levied in Japan (and everywhere else in the world), a tax is a tax. A tax on an individual is a tax on corporations, and a tax on corporations is a tax on individuals. All taxes are equally shared in the econnomy by all the participants. If a corporation has to pay more tax, then the cost of the tax is passed down to the consumer. If the rich have to pay a higher tax, then the rich have less to invest in the economy, which directly affects us. If the rich buy less toys, then the workers who build those toys lose money. If the corporations and/or rich are taxed to the point that they can't compensate by raising their prices or cutting their costs, they simply take their money and business to another country where they can continue to make money, and those of us left behind end up having to pay what the rich used to.

This is happening in Japan at this very moment. Japanese companies (those that can) are moving capital and operations out of the country as quickly as they can. The national government is trying to stem the tide by lowering the corporate tax, and promising a decrease in regulations, but it's too little, too late.

What more proof does anyone need that Abe's Three Arrows have fallen mid-flight????

Why don't they publish the name of the corporations that don't spread their wealth with employees after given 1 year to accumulate it? Shaming in Japan goes a long way. The government should reward the companies that invest in employees by buying shares of such companies with pension fund purchases when deregulated. Hopefully those companies that do spread the wealth will have more loyal customers then the ones that don't.

"But Reaganomics worked, didn't it? Do you remember 1980 in America?"

Yeah, I remember it as the era of the "rust belt," when America's manufacturing sector went down the tubes and Washington did nothing about it. The Japanese were flooding and dumping goods on the US market, illegally in many cases, and the Reagan administration's lame response was "free trade is good." They were too stupid to know that the Japanese products were heavily subsidized and protected with tariffs at home. LOL.

I remember a time when American consumers, long known as careful savers, first developed their addiction to private debt in order to maintain a veneer of affluence. Those BMWs looked nice but they were bought on credit. "Reaganomics" was an illusion.

Trickle-down economics doesn't work. It's just praised by people who love the theory but ignore what happens in practice.

Yeah, I remember it as the era of the "rust belt," when America's manufacturing sector went down the tubes and Washington did nothing about it.

Yup. Same under Thatcher.

Yeah, I remember it as the era of the "rust belt," when America's manufacturing sector went down the tubes and Washington did nothing about it. The Japanese were flooding and dumping goods on the US market, illegally in many cases, and the Reagan administration's lame response was "free trade is good." They were too stupid to know that the Japanese products were heavily subsidized and protected with tariffs at home. LOL.

Reagan did introduce tariffs, it was Reagan who passed a tariff on Japanese motorcycles larger than 750cc in order to save Harley Davidson, and a tariff was enforced against heavy imorted trucks, which is one of the reasons almost every large truck in America is made in America. Anothet thing to remember is that Reagan controlled neither house of congress during his presidency, and though the opposition was said to pro-union and pro-worker, it was quite friendly to Japanese lobbyists. Everyone knew about Japan's "one-way" trade policies, including Reagan, but he knew it would one day lead Japan to the situation it is in now. And he also knew that enacting similar trade practices in America would lead America to s similar place.

Next, you need to remember the poor quality of goods made in America during the 70's. GM was sued (and lost) for using poor quality steel in their vehicles, which began to fall apart quickly in the more humid environments in America. We also can't forget the Pinto fiasco and Ford's "let them burn" policy. AMC vehicles were a joke, my neighbor bought a new Gremlin, and the back wheel fell off when he was driving it home from the dealership. Chrysler was producing road-going behemoths with 7 liter engines which got poor fuel economy during a time when fuel costs were increasing steeply, and gas was being rationed in some places. It was after this nonsense that Japanese vehicles gained popularity.

Also remember that America had treaties with Japan dating to the post-war years which treated Japan favorably in it's export of goods like electronics, cameras, and the like. These regulations still exist today.

The last thing to remember was the Plaza Accord, which punished Japan for keeping the value of the yen low. Japan never fully recovered from this blow, and it was one of the big needles which burst the "bubble" economy. A lot was done during the Reagan years, but you would never know it.

No one seems to realize how long it takes for economic policies to fully effect the market place. Large policy changes affect the stock market in a matter of hours, but the full physical effect can take three to five years to be felt by the people. Abenomics is not Reaganomics, and it will not succeed unless the "third arrow" is substantial.

"AMC vehicles were a joke, my neighbor bought a new Gremlin, and the back wheel fell off when he was driving it home from the dealership."

AMC cars were a joke ). I remember that crap, those cars were terrible. Their javalin was there best model. Luckily Ford has come around and started to make exportable cars. When I visit other nearby countries I see a plethora of U.S. made products and I dont think they are all inferior to Japanese. Japanese protectionism is extreme in Japan.

"and it will not succeed unless the "third arrow" is substantial."

Ive yet to figure out just what is the third arrow. I saw the ex yokohama mayor promoting his 13 arrow manifesto in the diet yesterday. What is Abes third arrow going to be?

3rd arrow was deregulation, but at this stage I think it's not going to amount to much.

Ive yet to seen the fruits of TPP as well. Its my understanding the 3rd arrow has been launched? What deregulation? And what of Immigration reform?