politics

Diet passes record budget; Abe says no plans to postpone consumption tax hike

40 Comments
By Mari Yamaguchi

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40 Comments
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Tax hike plus increased government spending — this is push and pull nonsense combining fiscal stimulus with the opposing forces of austerity, net effect worse than zero.

Over the last few months it has looked like Abe would hold off further on the consumption tax hike. What a disappointment.

21 ( +23 / -2 )

So just goes to prove that Abe's consulting with foreign experts was just a show. Increasing spending, raising taxes, zero inflation or more like deflation (again), even with the cluster-mext of exemptions the consumers here are going to keep stock-piling their money, in their futon safes, and the economy is going to get worse, if that is even possible.

9 ( +10 / -1 )

Loser

5 ( +6 / -1 )

But the growth has remained below forecasts due to China’s slowdown and lackluster spending by households and businesses.

Growth has remained below forecasts due to the complete and utter failure of Abenomics. The initial growth was a growth in yen terms as a result of the devaluation of the yen; it was not a growth in real terms.

9 ( +11 / -2 )

This is just posturing to show he is strong leader determined to stand behind his ideas, but just watch if the polls show consistent opposition to the hike ( as they will ) , just before the election he,ll change tune and postpone because he is "listening to people`s concerns" and the "international situation has changed ".

13 ( +14 / -1 )

so you invite all these economists with their fancy nobel prizes to give you their opinions and advice on the state of the economy, and then you do the opposite of what they tell you. isn't this the definition of...stupidity? what a complete waste of time an money.

13 ( +13 / -0 )

I said he would go ahead with the tax hike regardless of being advised not to. He is stating the tax hike is necessary to support welfare, pensions, child and aged care, which he also stated for the first tax hike, but it never happened. He also stated the tax hikes were to support the public debt, but he has only borrowed more money. His statement about supporting infertility treatments is amusing. He should be more concerned about why 30% of women want to stay single due to a lack of men worth marrying. This goon couldn't run a bath, better less a country!

10 ( +12 / -2 )

postponed out of concern that Japan’s economy won’t be able to handle it.

Postponing the increase (even in it's neutered state, exempting a range of arbitrary products consumed by the rich) would be an admission that 3.5 years of Abenomics have been a failure at stoking growth in the economy.

There is cheap talk about tax revenues decreasing if the hike goes ahead, yet tax revenues are up, not down, since before the Abenomics days.

The tax increase is needed to maintain Japan’s welfare system and to secure confidence from markets and the international community, Abe said

Logically therefore, postponing or cancelling the increase should be accompanied by a policy decision to make cuts to the welfare system, or to say "sell my Abenomics" to the markets.

Of course a politician would never be consistent or honest in this manner.

1 ( +3 / -2 )

Abe never fails to deliver... failure. Government needs more taxpayer money in order to... spend more! Astounding!

9 ( +11 / -2 )

its a proven fact that increasing taxes kills economic growth. nothing good will come of this...

7 ( +8 / -1 )

The health insurance fee has also bee increased by 0,8% without big announcement and effective from April. So, where to save 2,8%? Either compensate by the unlikely salary increase, tighten the belt or most probably put pressure on the shop prices by selecting the cheaper stuff. Bye bye "made in Japan" welcome made in wherever it is cheaper.

10 ( +10 / -0 )

Ghost Rider has a very good point. Increasing taxes will further reduce consumer spending, especially on Japanese made products. It will only increase the demand for cheaper imported goods, which is contrary to Abe's dream of spurring on economic growth. This will only send Japan further into economic recession.

11 ( +11 / -0 )

combining fiscal stimulus with the opposing forces of austerity

What austerity? Government spending on all departments has increased to record levels under Abe, hence another record budget this year. A little austerity might do the government some good, but of course Abe and his friends won't be forced to live within their means just because everyone else in the country must.

The problem isn't that the government spends too little, but that they spend far too much. They spend so much that the rest of us ourselves have less to spend. The spend so much that they have altered the economy and created an economic never-neverland, where the stock market and domestic industries are now almost entirely dependent on being able to pump up their stocks and balance sheets with borrowed money.

8 ( +9 / -1 )

its a proven fact that increasing taxes kills economic growth.

Yes taxes aren't good for economic growth, but increasing taxes are a symptom of the problem, not the cause.

It is Japan's out-of-control government spending which is the root cause, and the problem is massive. Japan's finances need to be made sustainable, either through a) higher tax revenues (through higher rates or higher economic growth), b) higher inflation, or c) spending cuts.

Abe had 3.5 years to enact structural reforms that would boost Japan's medium to long term growth potential, but squandered it with a strategy of praying that a weaker yen would solve all the problems inherent to Japan's stagnating economy. The weaker yen has helped to boost tax revenues somewhat, but still nowhere near enough to plug the budget gap.

Further measures are required, or else Japan's potential consumers will continue to ferret away money for fear of not being able to rely on an increasingly bankrupt government to support them once they are old and grey.

7 ( +7 / -0 )

It is Japan's out-of-control government spending which is the root cause, and the problem is massive. Japan's finances need to be made sustainable, either through a) higher tax revenues (through higher rates or higher economic growth), b) higher inflation, or c) spending cuts.

Higher tax rates will push down consumption, higher inflation will do the same. One, the other, or both together will reduce any possibility of economic growth, and spending cuts are of course, out of the question.

The only further measures which will come are more spending, more taxes, and more currency devaluation. Revenue to the government will increase, but at a cost to the economy of 3 or 4 yen for ever 1 yen gained. The results will be more debt, less consumption, and steeper economic decline.

3 ( +5 / -2 )

yep opinion polls will dictate the tax hike, and hell postpone the hike when the timings right and he can generate the most browny points.

2 ( +3 / -1 )

I hope PM Abe plans to save taxpayer money by entombing Fukushima Daiichi NPP.... J Govt. Saying it is Politically Unacceptable to entomb Fukushima Daiichi NPP is not a smart move....

0 ( +0 / -0 )

Don't worry, Abe is betting on JSDF being involved in a war in the near future. Then the economy will rebound and everything will balance out in the end.

0 ( +1 / -1 )

What austerity? Government spending on all departments has increased to record levels under Abe, hence another record budget this year.

@sangetsu

What I meant was not government austerity, but consumer austerity — austerity imposed on consumers via the tax hike — which will dampen the economy. That will be in conjunction with Abe's plan of higher government spending to stimulate the economy. Push-pull, but net effect less than zero.

Abe's plan will tug both ways, working at cross purposes. It will dampen the economy with consumer austerity, but at the same time it will stimulate the economy with higher government spending. More damage done than good.

3 ( +3 / -0 )

So now on top of a record budget, where there is no money to begin with, and correct me if I'm wrong but part of the justification for the 5 trillion was that it would be needed without a tax-hike, but he's still also going to raise the consumption tax again after the Nobel winner recommended he not do so?

Can the clown show get any worse?

5 ( +5 / -0 )

Actually, cutting welfare benefits would accomplish the same thing, in terms of budget reduction. These payments to elderly voters are sacrosanct, and maintained to assure their loyalty to the LDP.

2 ( +3 / -1 )

It's only money.

0 ( +0 / -0 )

cutting welfare benefits would accomplish the same thing, in terms of budget reduction. These payments to elderly voters are sacrosanct

Old age pensions are not welfare, they are people getting out of the system what they have paid in. When a person has paid between 13% and 18% of his/her income into a pension scheme over period of 40 years (the premium is rising year on year), you can bet your parliamentary seat that pension is sacrosanct. Would you like to spend 40 years paying for something and then be told you can't have what you paid for?

2 ( +4 / -2 )

Money: the only thing that defies gravity.

-1 ( +0 / -1 )

I have a feeling he will delay the tax hike until the very last minute. That way many shoppers will go on a shopping spree before the tax hike takes effect. Then honest Abe will announce a delay in the tax hike and trumpet that consumer spending has increased.

2 ( +2 / -0 )

Japan Yesterday

Abe can't wait until the last minute to make a decision on the tax hike because retailers need several months to invest in new cash registers and pricing software. He'll make the decision in May. But if there is another massive earthquake or Lehman Shock this year, then he will probably postpone it which will create chaos for the retail industry.

1 ( +1 / -0 )

All the expertise on show here from so many people with seemingly unlimited experience running a country is truly humbling. Hooray for armchair economists everywhere. What is it they say about walking a mile in another man's shoes...?

-4 ( +0 / -4 )

Abe would have to admit the economy is failing if he were to not increase the tax. Abe would rather save face than save Japan.

2 ( +2 / -0 )

cleo, agreed, but we are all going to be told we can't receive the pensions we're paying for if we're under about 50 at the moment. Or that we won't get them until we're 75 but will be retired at 60. Plenty of recipients actually never paid a penny for their pensions, but that's besides the point I suppose.

Ghost rider, good point. My shakai-hoken is going up yet again despite it not being officially a tax increase, which it obviously is. This seems to happen every year and no one seems to see it as a tax increase.

Useless LDP policies continue unabated. More money for bureaucrats and concrete, same as always. Yet more debt for our children to somehow cope with. And the rural elderly will re-elect this idiot again, so we're stuck with the same failed policies for years to come. How depressing.

4 ( +4 / -0 )

@cleo

That's not how nenkin works. The retiree collects based on their last year of pay. The amount a person get depends on their political position in the company. People are forced into soft retirement at 60 then are given another job doing nothing at usually half the wage they were receiving before so that their company pension will be lower and their national nenkin will be based of the wage they made at 59. The unfair part is powerful people get a much better paying job after 60 and end up collecting 500-800% more but they only paid in for a few years. The real reason the national pension is broken is the powerful rape the system and don't put their fair share in.

3 ( +3 / -0 )

Plenty of recipients actually never paid a penny for their pensions, but that's besides the point I suppose.

Not beside the point at all. Those who don't pay in shouldn't be entitled to take out. The DPJ tried to abolish the free pension for housewives when they were briefly in power, but the opposition was too great and then the earthquake came along and everything else was forgotten about.

anon- I don't know where you got that from, but it's incorrect. The pension is based on how long you've paid in and, for koseinenkin, how much you paid in. It is not based on the last year of pay. I think perhaps you're getting confused with unemployment insurance, which is based on what you were earning immediately before you became unemployed.

Premiums for the national pension are the same for everyone regardless of income (with the exception of non-earning wives of sararimen, who get a free ride) and is based strictly on how long you've paid in.

1 ( +2 / -1 )

if there is another massive earthquake or Lehman Shock this year, then he will probably postpone it which will create chaos for the retail industry.

The shock will come after the tax is increased, and the decrease in consumption and revenue after the increase will make it all the harder to weather any future economic storms.

Rather than raise the tax to 10%, it should be abolished entirely. Everyone in Japan would then get a large raise in salary without having to twist the arms of companies, and the government would see the inflation they are after come in a more positive way, through actual demand.

But the government doesn't want the people to actually spend money, they want the people to give the govern the money, and then the government can spend the money to buy votes, favors, and generate graft.

2 ( +4 / -2 )

Clio, there are two pensions. The one you described is national, much like social security in the US, and it is 15,000 yen flat rate for all. You have to pay in for 40 years to get full payment in the end otherwise you are just throwing your money away. Payment is 720,000 a year.

The second it the "company" pension. This is where things get murky. The companies were responsible for these pensions many years ago but at some point in the 90's it was linked to the national pension because the companies were loosing money. Today, the national pension covers the overdraft of the company pensions which are based on last year salary. Many smaller companies have done away with these pensions but the big "Japan Inc" companies still have them.

-3 ( +1 / -4 )

The one you described....

I mentioned both the koseinenkin and the national pension.

The national pension is a flat rate, and you pay 40 years to get the full amount. If you've paid at least 25 years, you get a proportion calculated accordingly.

The 'murky' bit about the company pension (koseinenkin) is that the company is supposed to match what the employee pays in, and some companies didn't; when the pensions scandal broke (records missing, people's names being recorded incorrectly, etc) this came to light and some people were rightly miffed.

I repeat, the company pension is not based on the last year's salary. According to the government pensions website, the koseinenkin is calculated on the basis of the average standard remuneration (平均標準報酬額) dating from April 2004 to the time of retirement. Not the last 12 months of employment.

https://www.nenkin.go.jp/service/jukyu/roureinenkin/jukyu-yoken/20150401-03.html

-1 ( +1 / -2 )

Thank you those who contribute to the problem by receiving government money by not contributing anything useful to this country (many bureaucrats, whalers and workers adding unneeded construction, etc.)

0 ( +0 / -0 )

Another fine example of Abe trying to show he is smarter than the experts! When the ship sinks (Japan) Abe will carry that as his legacy!!!

His legacy... Ruined people's privacy Ruined any hope for Japan and its people to see a brighter economic future anytime soon. Pushed Japan back in to yet another recession....

I could go on but why?

1 ( +1 / -0 )

Abe is just so hopeless as PM but Japan has got the PM it deserves. There is absolutely no future in Japan for anyone.

0 ( +1 / -1 )

Paul Krugman has never met a tax he didn't like, so if he's telling you not to increase a tax now, it's a common sense issue that it's a really, REALLY stupid idea.

2 ( +2 / -0 )

Skeeter27

When the ship sinks (Japan) Abe will carry that as his legacy!!!

Not when he can specifically omit that from their history textbooks. That'll be his legacy.

0 ( +0 / -0 )

A lot of people seem to think that Abe isn't going to cancel / postpone the tax hike.

On the contrary, I'd say there's a 95% probability that he will. He just hasn't announced it yet, because he's doing his political strategizing at the moment.

-2 ( +0 / -2 )

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