politics

IMF says Japan should raise consumption tax to 15%

93 Comments

The International Monetary Fund on Wednesday said that Japan needs to raise the consumption tax to at least 15% to reduce its public debt and avert another international financial crisis.

A senior IMF adviser told a news conference in Washington that the Japanese government needs to be much more ambitious in its tax reform plan. The IMF said in a global financial report that doubling the consumption tax rate to 10% by 2015 will not be sufficient in itself to put Japan's debt ratio on a downward path.

In Tokyo, Deputy Prime Minister Katsuya Okada admitted that raising the consumption tax to 15% by 2020 will probably be inevitable in order to guarantee minimum pension benefits.

Meanwhile, the IMF slashed its forecast for world economic growth, warning the weight of the eurozone crisis threatens to capsize the global recovery.

The IMF cautioned that sharper budget cuts by major economies in the face of slower growth could exacerbate the slowdown, and if European leaders fail to get on top of their debt crisis, global economic output could be cut by more than half.

In an update of its September economic forecasts, the IMF cut 2012 projections to 3.3% from 4%, and said the 17-nation eurozone would contract by 0.5% this year.

It said global growth could pick up to 3.9% in 2013, but only if market panic over eurozone fragility is avoided.

"The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere," the IMF said. "Financial conditions have deteriorated, growth prospects have dimmed, and downside risks have escalated."

The lowered forecast was tied directly to the euro area economy's expected fall into "mild" recession in 2012 on the back of government spending cuts and commercial banks reducing lending.

"Growth in emerging and developing economies is also expected to slow because of the worsening external environment and a weakening of internal demand," it added.

The IMF has been warning for weeks that global growth was weakening due to the European crisis.

© Japan Today/AFP

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93 Comments
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Ok. let IMF make a consumption tax chart for the world.

2 ( +4 / -2 )

Amazing how Japan was doing fine without any consumption tax until 1989.

3 ( +8 / -5 )

Amazing how Japan was doing fine without any consumption tax until 1989.

Limited taxation is often possible when you're in boom years, have low debt and have a large number of workers supporting a modest number of retirees. When you've got a stagnant economy, a pile of debt and far fewer workers per retiree, you need extra taxation.

2 ( +4 / -2 )

Consumption tax is a fair tax, but the trouble in Japan is that they just add it as another extra tax and don't remove all the other sales taxes for example in the auto industry like purchasing tax, weight tax, engine size tax, and there are many other examples. Also, many people here collect the tax but don't pass it on to the government.

NZ did it the right way with their GST tax. They removed all sales taxes and reduced the income tax. There are still taxes on gasoline and tobacco but every country keeps those taxes.

1 ( +3 / -2 )

Fine, go ahead and do it if that is what needs to be done, but at least lower the basic cost of the item first, and be selective about what items are taxable. Yes, we pay 20% VAT in the UK but many items considered "staples" - bread, milk, fruit and veg, and childrens clothes are tax-free. And when you apply 20% sales tax to an item costing the equivalent of 50 yen, it is still better value for the consumer than the same item costing 100 yen with 5% sales tax on it.

6 ( +8 / -2 )

A blanket tax of 20% would just lead to the creation of a black market.

4 ( +6 / -2 )

Japan buys Europe's debts, even though it's debt ridden itself. Japan's economy is not as in desperate situation as so many think. It's much stronger than US and UK.

-7 ( +5 / -13 )

IMF needs to join the UN, for a lovely long stroll off a very short pier.

6 ( +8 / -2 )

Japan's economy is not as in desperate situation as so many think. It's much stronger than US and UK.

You need to put that sake down oginome-san. The purchase of Eurozone debt was just a political move and a delay game tactic. Nothing more. And in case you missed it, you should read this latest round of really bad news for Japan:

"UPDATE 3-Japan's first trade deficit since 1980 raises debt doubts"

http://www.reuters.com/article/2012/01/25/japan-economy-trade-idUSL4E8CO5N420120125

And as we all know, Japan's entire economic model is based on exports. Up until 2007, that was working pretty well. But then came the 2008 collapse and the Lehman crash and that changed everything. And don't forget the aging depopulation problem that doesn't have any real solution in sight. This will become much more significant very soon as the health care payouts and pension payments increase even more. More debt.

Major manufacturers are now moving production out to other countries. That equals even more unemployment/underemployment (permanent) and more welfare payments and even more debt.

The trifecta disaster up North equals even more debt.

70% of the 11 trillion dollars of household assets in Japan are held by people 71 and over. Of course, when they pass on the gooberment will realize a mid-term windfall from the inheritance tax revenue. But it won't even be close to enough to bring down the debt. So, in time, consumption taxes will have to be raised from 20% to 25% and then 30%. Once raised, no taxes ever come back down.

But even that won't be enough as more than half of ALL of the JGov tax revenues will have to be used just for interest payments on the ever increasing debt. Right now it's already at 50% and climbing.

Thus, the only way out of this vortex is for Japan to offer JGBs to foreign markets. But in order to make the JGB competitive on the world market, the BOJ will have to raise the interest rate and that will result in even more debt. Then they'll have to raise it again. Even more debt. And then again as the rest of the world recovers and offers better interest payments on their sovereign debt. And if Japan's long rates go too high - BOOM! Deflation will turns into hyperinflation overnight.

Then what?

4 ( +7 / -3 )

I have no issues with paying more but like Nicky, think things need to be decided upon. 15% tax on food is crazy. Same goes for books, children's clothes, feminine products, meds...

If Japan wants to raise the rates like the UK and Canada, I want "free" medical care. None of this crap where I have to pay when at doctor's visits. We get taxed a lot here with "hidden" taxes but the government doesn't give enough back. Raising it just means they have more to waste. Reforms and cuts need to be made. Will they do that though? Fat cats with cream. The diet needs to take pay cuts, the bottled water at meetings needs to be done away with, as does the government housing for government workers, roads to nowhere...

5 ( +7 / -2 )

Ogi...yeah, obviously you have no idea about economics. The fact that your debt is more than 200% of what you produce each year, and now you are in a trade deficit situation means nothing to you, huh?

3 ( +3 / -0 )

The IMF and the UN are just "black holes" for money. President Obama is already questioning the USA contribution to the UN. Japan is also a major contributor to the general fund of the UN. Japan must not let the IMF dictate the consumption tax in Japan or any other country. If the dictate is accepted, the Japanese economy will be destroyed.

-3 ( +2 / -5 )

Debt is cancer of the world economy. Only the elite banks benefit from it, whilst we all suffer raising tax... There was no real reason for any government to borrow originally, but it was the European bankers back in the 18th and 19th century who convinced the worlds governments that borrowing is good. Sadly, now (borrowing by governments) is accepted as being normal..... Which it isn't.

Trouble is, most people (including politicians) have no real idea how we are all slaves to the central banks. Every man, woman and child should learn about the 'Debt Money System' and 'Fractional Reserve Lending' and how evil they are. Only a select few benefit from it, whilst we also suffer the consequences of a system that is doomed to fail because it cannot continue indefinitely. So called stimulus' (a.k.a borrowing more money) is only deferring the problem and making it worse. And yes this is true, I am not some conspiracy theorists.

Watch this and learn, we ALL need to know the root of the problem, otherwise nothing and I repeat nothing will change: http://www.youtube.com/watch?v=7qIhDdST27g

5 ( +8 / -3 )

it's all been said before but cutting the number of civil servants and ridiculous waste on public spending mught help. duh.

4 ( +4 / -0 )

@oginome-san. Almost forgot, but now, right now, the entire nation of Japan is running on just four nuke reactors. And most likely, they too will have to be shut down sometime in the near future. In the mid - long time, they will ALL have to be shut down as more and more earthquakes continue to erupt.

Therefore, the dependency on fossil fuel will increase imports even more. And as the current oil wars/conflicts, sanctions and trade wars increase - the more it will all cost. Result = more debt for the whole world not just Japan.

@tokyokawasaki Thank you for your post. You are right on the mark. Also, the creation of the US Federal Reserve in 1913 just made everything even worse. Now the central banks are just trying to stabilize and delay the imminent economic global collapse. It's no longer a question of "if" only "when."

And then what?

God help us all.

1 ( +3 / -2 )

Great idea! Just what we need to boost consumer confidence and spending in Japan.

3 ( +3 / -0 )

A raise in the consumption tax would force even more working poor, elderly, single mothers, etc. into poverty. How about increasing capital gains taxes and 'sin taxes' like tobacco and alcohol, which would also reduce medical/hospital expenses through a healthier citizenry. In Canada, (Toronto, anyway) cigarettes cost between $8 ~ $10 a pack and alcohol is about 20% more expensive. As a person who likes his drink and periodic cigarettes, I would be more than willing to pay a little more if it meant reducing the tax burden on society's less fortunate.

5 ( +5 / -0 )

You need to put that sake down oginome-san

I don't drink. :)

And as we all know, Japan's entire economic model is based on exports. Up until 2007, that was working pretty well. But then came the 2008 collapse and the Lehman crash and that changed everything. And don't forget the aging depopulation problem that doesn't have any real solution in sight. This will become much more significant very soon as the health care payouts and pension payments increase even more. More debt.

The world economic crisis (started by the bursting of America's finanical bubble) didn't affect Japan's trade surpluses in any real way, the surplus was there in 2008, 2009 and 2010. It was Japan's own black swan that cause that aberration last year. 2011 was a disaster, because of the tsunami, nuclear crisis, flooding of Japanese factories in Thailand and price transfering. They'll have a trade surplus this year.

Major manufacturers are now moving production out to other countries. That equals even more unemployment/underemployment (permanent) and more welfare payments and even more debt.

They've been offshoring low-end manufacturing for a while now, but the unemployment rate hasn't changed. Japan continues to further strengthen its monoply in advanced, high end manufacturing, and it's going to continue that way for a long, long time, because other countries have just simply neglected their own advanced manufacturing industries for too long and the Japanese are now too far ahead to compete with effectively. As a result, nearly every technological device in the world, no matter what company makes it, relies totally on Japanese technology in the most important, refined areas. The IPhone alone relies on over 1/3 Japanese technology (for the most sophisticated elements of course).

70% of the 11 trillion dollars of household assets in Japan are held by people 71 and over. Of course, when they pass on the gooberment will realize a mid-term windfall from the inheritance tax revenue. But it won't even be close to enough to bring down the debt. So, in time, consumption taxes will have to be raised from 20% to 25% and then 30%. Once raised, no taxes ever come back down. But even that won't be enough as more than half of ALL of the JGov tax revenues will have to be used just for interest payments on the ever increasing debt. Right now it's already at 50% and climbing. Thus, the only way out of this vortex is for Japan to offer JGBs to foreign markets. But in order to make the JGB competitive on the world market, the BOJ will have to raise the interest rate and that will result in even more debt. Then they'll have to raise it again. Even more debt. And then again as the rest of the world recovers and offers better interest payments on their sovereign debt. And if Japan's long rates go too high - BOOM! Deflation will turns into hyperinflation overnight.

Most of Japan's debt comes from different government agencies borrowing from another, it's internal. The Ministry of Finance advanced $100 billion in the IMF back in 2009... and yet we keep hearing about this debt crisis. So Japan is the country which props up the IMF, and the IMF bails out the economic disaster zones in Europe. Japan itself continues to buy European debt. And the same IMF, which is reliant so hugely on Japanese money to function, is now advising Japan?

-4 ( +2 / -6 )

I am somewhat optimistic and think (hope) that things will get better in time. But at this point there are many very dangerous economies on the brink. And if just one of those goes pop..... :/

0 ( +2 / -2 )

oginome,

I think your good at cherry picking & day dreaming, if you think Japan is fine now, well I guess all I can recommend is take off those blinkers you need to broaden your view of the world & whats been happening, trust me Japan is far from imune to whats going to hit us all.

And when it hits WE ALL will hurt SEVERELY, then over time & possibly war, recovery, but Japan isnt good at that so I see Japans future as one that wont really recover next time round, if it remains soverign nation anyway.

3 ( +4 / -1 )

We have surrendered the world to the IMF, WTO and big business. Our governments do not represent us, they represent big business interests. And we, the working people of the world, are just numbers for these people and not human beings with real life realities to face. At least not beyond their need for us to work and consume.

There are some inescapable contradictions here. Yes debit is high in Japan. But that debt is largely held in Japan. So Japan is not Italy or even the US in this regard. Yes more money is needed to sustain the future of benefits. But first we should be looking at efficiencies in current spending and in better cost management by the government before putting more taxes on already burdened people.

Then there is growing poverty and low consumer spending/confidence. With higher taxes these both grow in severity and we see downstream heavy impact to spending and thus further decline in jobs and the cycle spirals from there.

So clearly the answer today is not a tax raise. The answer is to create jobs and to create a Japanese New Deal to put people to work. Many economists are saying that domestic investment in broad scale infrastructure work could generate jobs and thus help. Added to a more open immigration scheme and radically changed policies to encourage foreign business to come to Japan and we start to have a working plan.

Or you can ignore these facts, raise taxes to 15% as the IMF suggests and watch Japan circle down the drain even faster.

4 ( +6 / -2 )

Why not just cut domestic spending on wasteful projects by at least 5% per year, instead of wanting to raise taxes by the same amount? Sorry...crazy idea.

4 ( +4 / -0 )

Weasel. Sadly that would require a government that actually represents people and not the political elite. Afterall a lot of that waste spirals into the pockets of the politicals and their buddies. This is true everywhere, not just Japan.

3 ( +4 / -1 )

I think your good at cherry picking & day dreaming, if you think Japan is fine now, well I guess all I can recommend is take off those blinkers you need to broaden your view of the world & whats been happening, trust me Japan is far from imune to whats going to hit us all.

Haven't day dreamed, just listed facts.

-1 ( +2 / -3 )

@Equality A very good idea. But don't forget that 50% of JT is owned by the Japanese government. So if they raise taxes on smokes then more people will quit. And, of course, that would mean even less tax revenue for the JGov. And that will mean even more debt just to keep JT afloat. Raising taxes on alcohol might work for a while as the lifeblood of Japan is alcohol so that may happen soon.

And there is another possibility which apparently is now being discussed in the Diet and that is arms manufacturing and world wide arms sales. This includes all kinds of weapons and even nuclear weapons. That would increase employment and tax revenue, however the word "nuclear" is not a very popular term these days. So that may limit the plan somewhat.

Also the worldwide arms sales market is extremely competitive. And with Japan getting into it all only now would be a very difficult task. Then to realize real revenue and profit would take some considerable time. Furthermore, even if it does pass through both houses, how would they get it all started and keep it running for the first 10-15 years or so? With more debt from all of the subsidies that will have to be furnished by the JGov. So this too may not a viable solution. It's just an idea at this time.

So, as far as I see it, there are not many other real revenue generating ideas being discussed. Well, perhaps faster and cheaper production and sales of more stable electric cars, but that too is unsure at this time and time is running out. So, so.....(?_?)

1 ( +2 / -1 )

Such a shame that foreign long term residence in this country can't vote. If we could, we could actual hold the government accountable and question them on their spending.

4 ( +6 / -2 )

@Oginome: Samsung is spending $42 billion this year on advanced technologies that compete directly with Japanese technology... I beg to differ with you in the regard that Japan is "too far ahead to compete with". What industries are you actually talking about?

4 ( +4 / -0 )

Implement a sin tax on tobacco and alcohol and the coffers will be overflowing with money.

2 ( +3 / -1 )

@oginome You make some very good points and I really hope that you are right. But I have many doubts as the world just cannot endure another Eurozone collapse. If so, game over.

And yes the unemployment rate has been steady in Japan, but what does that rate really mean? Just like in the US and other nations nowadays that percentage is mostly a measure of those who have had their unemployment benefits expire. Of course, some highly qualified folks quickly get new jobs. But for so many others, that rate does not measure underemployment or those who have just given up. And there is no way to tell exactly how many of those unfortunate souls are currently in that trap.

And you're right on as most of Japan's debt is internal. That's good and bad in a way. But don't forget the Japanese National Pension System went from net buyer to net seller about a year ago or so. So that means that the need for more JGB buyers has been considerably increased and the model of a self-sustaining internal debt machine is starting to crack. As I'm sure you know, that kind a system only works as long as there are new participants or buyers coming into the matix. So with that very significant change of the JNP coupled with the drastically low birth rate, the number of incoming participants is rapidly decreasing. Therefore, at some point in time, they will have no other option but to offer the JGB to the world market. And, of course, the world sovereign debt market is also extremely competitive. So I really just don't know of any real long-term solution for Japan at this time. Perhaps you do?

2 ( +4 / -2 )

@MeLuvULongTime: You are correct. Japan currently considering changing export parameters regarding weapons. For many years Japan has preached Peace and Prosperity but as times have changed and the market for weapon sales has grown this policy is being reviewed. Japanese companies have been missing out on a huge market for Ideology reasons. It will be interesting to see how this proceeds.

2 ( +2 / -0 )

Samsung is spending $42 billion this year on advanced technologies that compete directly with Japanese technology... I beg to differ with you in the regard that Japan is "too far ahead to compete with". What industries are you actually talking about?

The Japanese are miles ahead of the South Koreans in advanced manufacturing, who anyway purchased most of their high-end manufacturing know-how from the same Japanese who don't need it anymore. Semiconductor grade silicon crystal comes almost completely from Japan. Of the 39 manufacturers who make the tiny, miniturised skill-requiring components which cell phones require to function, 29 are Japanese. Capacitors, the size of a grain of salt, essential to the running of all electrical devices, come completely from the Murata company located in Kyoto. Toshiba provides the technology which makes up the most sophisticated 1/3 of the I-Phone. Specialised production keeps increasing, not declining. Japan dominate the fields in laser diodes and optical fibres. NAND flash memories and microcontrollers are other strengths. Charge coupled devices. Chokepoints in avionics, carbon fibre, titanium. Miniturised disk drive motors. The list goes on and on. When the tsunami hit backwater Tohoku region, it caused a worldwide supply shock in manufacturing, because Japan dominates the field of producer goods, goods which every company in the world relies on, Japanese or no Japanese. There's no comparison.

-1 ( +3 / -4 )

Thank you Wurthington. Yeah, the idea of arms sales may actually work and gradually improve Japan's economy. But if the JGov actually approves it, there will be many negative political repercussions in Japan and throughout the world. And let us not forget how President Eisenhower warned us of the dangers of building up a military-industrial complex back in the '60s. That is exactly what happened in the US and nothing good has come out of it. It's like a snowball rolling down a hill. As it goes down, it gets bigger and bigger and bigger until it becomes an out-of-control landslide. And for that to happen in Japan, well, let's just say for now that China, Korea and other Asian nations would not be very happy at all.

0 ( +2 / -2 )

I really cant understand why Japan will not raise the tobacco tax by 20%!! If Japan was to charge 1500 yen per back of cigarettes, Im sure Japan will be able to generate a whole lot of money, and while they are at it, they will probably make a lot of people much more healthier at the same time. They can also increase the tax paid by people who run love hotels and pachinko parlors too. There are so many ways to generate money and clean up Japans society at the same time.

Oh, I forgot, Japanese people are all dysfunctional and corrupted so they if they do that, it will be admitting that they are all illegal.

2 ( +3 / -1 )

@Oginome: You are correct but many of these industries have become commoditized to the point that margins are very thin. In addition the Nikkei 225, even withouth Daishinsai, is still at 20 year lows while South Korea's markets are within 5% of a 20 year high. Beleive me... if Japan had a monopoly on as much manufacturing and technology as you say these market numbers would be very different. I still beg to differ.

0 ( +1 / -1 )

Numbers don't add up, the circle needs squaring, the Gordian knot remains...

End game approacheth...

1 ( +1 / -0 )

Haven't day dreamed, just listed facts.

Oginome,

I am not sure if you know what cherry picked means, if not(sorry if you do understand) it means be very selective in yr analysis/thinking, not seeing more of whats going on.

I dont dispute that Japans high end tech is awesome, it is! BUT look at Sharpe for example they were ranting & raving about new screen technology that very quickly simply became a commodity, we see this time & time again. The time J-companies can profit from this high tech is quite short. J-companies are on the verge of giving up on TVs altogether, its a pattern it seems you choose to ignore.

And come on you cant seriously think high tech companies can keep ALL OF JAPAN afloat? Japan has been in 20yrs of decline at least, it isnt getting better its getting worse.

If Japan doesnt re-think its ways of living, doing business etc, it will (& is) continue its downward spiral.

Bottom line is govt & business MUST re-think everything, if ministry budgets dont come down & value increased we are all set to suffer BIGTIME.

Now I realize other countries have same/similar & different problems that need tackled, but the topic here is Japan. I dont want to come off sounding mean, I am just calling it as I have seen it, point blank Japan has declined in a BIG way since I first landed here in 91, the evidence is everywhere, again take off those blinkers(race horse wear them) & you will see what is so obvious to many of us on jt!

3 ( +3 / -0 )

Interesting how the very people who want Japan to contribute to their FUND, now tries to tell Japan who has the funds, how to manage it. No foreign government interferes with other governments unless by War and otherwise undisclosed behind the scenes methods of manipulation. How dare an almost bankrupt organization due to its mismanagement of those they gave loans to like Greece, tell one of the few countries that do contribute regularly to the fund and with almost no guarantee that the funds will be recoverable, tell Japan how to run its business.

GREED and MISDIRECTED statement. Let Japan decide "how" best to revive its economy. Japan has the means.

Japan definitely plays a key role in the world economy, whether desired by the Japanese people or not. Japanese government is fine. it is the political figures as well as the general population of Japan that put the politicians in office that is now the problem. Here as in too many other countries, personal gains dominate the agenda and the overall national and social goals are ignored along with the principles that guide a sound representative government.

Lurking very closely on the side are the very real and most powerful threat of world dominance that do not have such representative government. IMF is but a tool for those that are trying desperately to counteract that threat. That is because sound economies control people and without a good working economy, chaos begins. When there is chaos, those with financial and military power or those with so called -isms will start to control people for their own ends. Ultimately, those who control people control everything.

-4 ( +0 / -4 )

@Oginome: I did some research... Toshiba Corp, the company that you say produced 1/3 of the phone. The share price is currently near 30 year lows. How is it that a company with so much technology could be doing so poorly. This while Apple, which does little to no manufacturing is the World's darling with a 40% return on equity. And remember this; you can have market share and manufacture but if you do not produce profits you will not have the cash for Research and Development. Bottom line is profits. On the other side of the coin I do worry about South Korea squeezing out non profitable manufacturers of electronic components. If the squeeze out enough they'll be able to dictate prices. South Korea, Taiwan and some Chinese manufactures are why companies like Apple has succeded as of late. If I were at Apple I'd start securing production again because South Korea scares me. I'd by Japan's Sharp and I'd buy Elpida too. They're pretty cheap right now.

1 ( +1 / -0 )

@GW.. totally agree with you. The numbers just don't lie.

0 ( +0 / -0 )

REALLY?? the the unemployment rate has been steady in Japan b/c its getting smaller......... in 2011 Japan's population lost 125,000 people.

In 1990 the U.S. Economy was 5.7 Trillion dollars and Japan was 2.3 Trillion dollars....... in 2010 Japan was at 5.4 Trillion Dollars and the US was at $14.5 trillion in 2010.

National debt of 211% GDP currently, 20 to 30 million less people putting Japan below 100 million by 2050 (25% of the current population or 2 Cities like Tokyo and Osaka gone) and with 25% of the population being over 65 in 2050.

because other countries have just simply neglected their own advanced manufacturing industries for too long and the Japanese are now too far ahead to compete with effectively. As a result, nearly every technological device in the world, no matter what company makes it, relies totally on Japanese technology in the most important, refined areas.

Large Japanese companies for mass production are some of the most advanced anywhere. Japanese offices in contrast are often backwards and terribly inefficient. Even these days you can see desks with piles of papers and things. Some traditions like using your hanko are still quite entrenched, if DARPA put out what they have into the consumer world, it would knock industries on their ears. But the military wants it for themselves. Last time I checked Japan only had about 20-50 Software companies. They are still making the same parts they where making in the 80's........but Japan is still ahead??

Japan, meanwhile, has been stuck in stagnation and deflation for two decades. Decisive economic policy has been lost in the revolving door of the country's top leader ,15% by 2020..... I'm thinking more like 20% by 2015.......

1 ( +1 / -0 )

Japan SHOULD turn back on EVERY nuke reactor it has. Instead the government did the STUPID thing and listened to the publics IRRATIONAL fears of a nuclear holocaust, NOW we are in a trade deficit becuase of it!!! thank you everyone who campaigned to against nuclear power. Because of you the Japanese economy will probably fail and you will not be able to feed your families. BUT incase another earthquake hits in 1000 years your broke starving great (15x) grandchildren will be radiation free while they fight tooth and nail for a bight to eat against. The tri-disater made exports drop 2%. Guess how much IMPORTS went up? 12%. that means 1st trade deficit in 30 years! guess what that 12% was. it was OIL, COAL, and LGP to make up for the loss of nuclear power. hope everyone is happy. more Green house gases. Strengthening China's ecnomdiny (where do you think the coal and LGP are coming from) and killing the Japanese economy. but NO, the public cant see more than 1 cell phone cycle in front of them.

-2 ( +3 / -5 )

@Tyler Vandenberg: Spot on Tyler... and if Japan were to really open its markets it would be even worse. I thought it was quite funny that Japan and South Korea were considering a TPP style of trade agreement. The agreement would be... well alright we already don't buy your products and you don't buy ours so lets just agree to keep it that way.

1 ( +1 / -0 )

You are correct but many of these industries have become commoditized to the point that margins are very thin. In addition the Nikkei 225, even withouth Daishinsai, is still at 20 year lows while South Korea's markets are within 5% of a 20 year high. Beleive me... if Japan had a monopoly on as much manufacturing and technology as you say these market numbers would be very different. I still beg to differ.

Japan doesn't afford the stock market the same position of importance as in some Western countries, and anyway the stock market is structured differently from the US model and is heavily regulated and manipulated by the government bureaucrats. Don't forget the Japanese are risk averse. And it doesn't matter how commoditized the industries have become, it's a fact that Japanese monopolises high end manufacturing and it shows in the trade surpluses which have kept increasing year after year (except for 2011), even after the burst of the bubble and the two 'lost' decades that followed.

I did some research... Toshiba Corp, the company that you say produced 1/3 of the phone. The share price is currently near 30 year lows. How is it that a company with so much technology could be doing so poorly. This while Apple, which does little to no manufacturing is the World's darling with a 40% return on equity. And remember this; you can have market share and manufacture but if you do not produce profits you will not have the cash for Research and Development. Bottom line is profits. On the other side of the coin I do worry about South Korea squeezing out non profitable manufacturers of electronic components. If the squeeze out enough they'll be able to dictate prices. South Korea, Taiwan and some Chinese manufactures are why companies like Apple has succeded as of late. If I were at Apple I'd start securing production again because South Korea scares me. I'd by Japan's Sharp and I'd buy Elpida too. They're pretty cheap right now.

Apple is totally reliant on Japanese technology to create, let alone sell its products. The difference in share prices between it and Toshiba doesn't change this. Share prices will always fluctuate.

I dont dispute that Japans high end tech is awesome, it is! BUT look at Sharpe for example they were ranting & raving about new screen technology that very quickly simply became a commodity, we see this time & time again. The time J-companies can profit from this high tech is quite short. J-companies are on the verge of giving up on TVs altogether, its a pattern it seems you choose to ignore.

Japanese is giving up on the manufacturing of TVs to further focus in on high end manufacturing. The Koreans and Taiwanese will have less competition now. Everyone wins. Sharp won't go bankrupt.

And come on you cant seriously think high tech companies can keep ALL OF JAPAN afloat? Japan has been in 20yrs of decline at least, it isnt getting better its getting worse.

Japan's trade surplus has continued to grow hugely since the bubble burst. And the economy has actually GROWN over the past 20 years, as slow as it may seem to some, and this growth is even more impressive when you factor in the almost total lack of any population growth.

Now I realize other countries have same/similar & different problems that need tackled, but the topic here is Japan. I dont want to come off sounding mean, I am just calling it as I have seen it, point blank Japan has declined in a BIG way since I first landed here in 91, the evidence is everywhere, again take off those blinkers(race horse wear them) & you will see what is so obvious to many of us on jt!

Have no blinkers on, I'm aware Japan has many faults, but its economy is stronger than the 'finance' and 'spending' based US and UK which are falling apart.

REALLY?? the the unemployment rate has been steady in Japan b/c its getting smaller......... in 2011 Japan's population lost 125,000 people.

Um, the unemployment RATE is per what the population is at that time.

In 1990 the U.S. Economy was 5.7 Trillion dollars and Japan was 2.3 Trillion dollars....... in 2010 Japan was at 5.4 Trillion Dollars and the US was at $14.5 trillion in 2010.

But look at the population growth differences between Japan and US in those years.

Large Japanese companies for mass production are some of the most advanced anywhere. Japanese offices in contrast are often backwards and terribly inefficient. Even these days you can see desks with piles of papers and things. Some traditions like using your hanko are still quite entrenched, if DARPA put out what they have into the consumer world, it would knock industries on their ears. But the military wants it for themselves. Last time I checked Japan only had about 20-50 Software companies. They are still making the same parts they where making in the 80's........but Japan is still ahead??

Yes, Japan is the world leader in advanced manufacturing, since it makes most of the producers goods. It continues to further specialise and upgrade. That's a fact.

-1 ( +3 / -4 )

@Oginome: Here is a link to what is inside an iPhone 4 and its suppliers: http://www.isuppli.com/Teardowns/News/Pages/iPhone-4-Carries-Bill-of-Materials-of-187-51-According-to-iSuppli.aspx

It, beyond a doubt, proves that Apple is NOT totally reliant on Japanese technology or manufacturers. How can we believe what you write when the data is easy to locate that totally refutes your statments.

1 ( +3 / -2 )

Whatever the IMF say's countries should ignore. Can anyone direct me to a country that has,often under dire financial circumstances, taken IMF advice and is now a booming economy? And has paid of its debts? The IMF serves to reduce benefits and advantages that working people in any given country has. Basically their medicine is reduce government spending, raise taxes and make the less well off pay for the mistakes and excesses of the rich.

During the so-called Asian financial crisis around 98-2000 only Malaysia refused to adopt the IMF's harsh measures and they were the only country to come out of the "crisis" better off. Had the prime minister of the time not been so obssessed with having the opposition leader framed on sodomy charges he would have been seen as a financial wizard and an example to the world why saying no to the IMF is the way to go.

Raising the consumption tax just means that average working people pay more tax. As most low earning workers spend most of their salaries each month they proportianly pay much more than the rich. They subsidise the rich and under this rule pay an extra 10% to get the pension they have paid into all their lives. Better off people do not spend all disposable income therefore save more money without a 10% surchrage. Yet they still get their pension partly funded by those least able to pay.

Tell the IMF thanks, but no thanks. When the IMF starts speaking equality and those with the ability to pay more to contribute more then we should listen to them. While they continue on their mantra of punish the poor they should be ignored. They are a right wing organisation bent on keeping power in the hands of those who currently hold it.

0 ( +1 / -1 )

Apple is totally reliant on Japanese technology to create, let alone sell its products.

This is great. You might want to tell Apple that. Oh and selling? Yes, Japan loves their Apple products because they know Sony, Toshiba, Panasonic... are all crap in comparison. You're soft of proving everyone's point here with this comment.

-1 ( +3 / -4 )

SimondB. Exactly. Nice post.

0 ( +0 / -0 )

All readers back on topic please.

0 ( +0 / -0 )

http://www.isuppli.com/Teardowns/News/Pages/iPhone-4-Carries-Bill-of-Materials-of-187-51-According-to-iSuppli.aspx

Did you not read your own link? For starters, Japanese companies AKM and Murata are both there!. Secondly, the non-Japanese companies you see on the list are still reliant on Japanese technology. Look at the non-Japanese semi conductor companies. They require semiconductor-grade silicon, which two Japanese companies, Sumco and Shin Etsu are the world's leading suppliers. You're not getting it. The Japanese have a chokehold on PRODUCER's goods, they make what producers in turn need to make products.This is Japan's advanced manufacturing dominance.

This is great. You might want to tell Apple that. Oh and selling? Yes, Japan loves their Apple products because they know Sony, Toshiba, Panasonic... are all crap in comparison. You're soft of proving everyone's point here with this comment.

No need to tell Apple, they know. And I don't know why you're here. you were the one who thought Japan's manufacturing industry was dead, LOL.

-1 ( +2 / -3 )

pamelot at 9:03AM - Here, here!

-1 ( +0 / -1 )

IMF Thank you for your kind recommendation to increase our consumption Tax but NO Thanks!

1 ( +1 / -0 )

If it continues to be increased, the cost of living will sky rocket like the UK and Switzerland.. yes higher tax pays for a lot of other things in a society.. however there should be other alternatives to tackle the debts.

0 ( +0 / -0 )

The IMF telling Japan to raise more in consumption tax?

This must be music to the ears of some in government.

It is at times like this that Gai-atsu can prove so useful.

I can just hear those proponents of a larger raise in the Sho-hi-zei shouting: "Hear hear!"

0 ( +0 / -0 )

Cut the wasteful spending and the taxes could be lowered.

1 ( +1 / -0 )

Oginome writes well and seems to be a specialist. Japanese engineers and scientists are the ones always doing better than others. It is not by simple luck that many plants and factories are managed by japanese citizens in Asia. IMF IS managed by greedy banksters. I know it, I am French!

0 ( +2 / -2 )

The maximum tax paid by any private individual, income tax/sales tax/whatever/ should be 20%. All people earning less than 3 million yen per year should pay zero income tax.

The maximum tax paid by a business, corporate tax/sales tax/whatever should be 25%. All business earning less than 10 million per year should pay zero business tax.

Sales tax should remain at 5%.

2 ( +4 / -2 )

Japan's economy is not as in desperate situation as so many think. It's much stronger than US and UK.

This is absolutely true and is the heart of the matter.

I think we need to cut payroll tax in Japan, cut corporate tax and cut capital gains taxes. This will put more money in the hands of the job creators, so that we can get the economy running again. Increase the consumption tax to 20%, but make fresh food tax free.

Luxury taxes should be done away with. I'd love to buy a new domestic yacht, but the luxury tax is crazy. So I have to get one overseas. This deprives the yacht maker of work.

-6 ( +1 / -7 )

The maximum salary of any politician including the PM and governors should be pegged at 20 million yen.

The civil service should be abolished and replaced by NPO's.

2 ( +2 / -0 )

haha Zichi - What quality of staff do you think are going to work for 20 million yen? Pay peanuts, get monkeys.

-3 ( +0 / -3 )

Last year, 2011 there was 90 trillion yen out of general circulation and kept in private homes or business.

4 ( +4 / -0 )

theResident,

politicians should not be doing it for the money!

3 ( +3 / -0 )

Point taken Zichi - but live in the real world....please.

0 ( +0 / -0 )

And I don't know why you're here. you were the one who thought Japan's manufacturing industry was dead, LOL.

Care to point out where I said that. You have a habit of putting words in others' mouths...

-1 ( +0 / -1 )

theResident,

Doctor's salary is ¥500,000/¥1 million per month. I'm living in the real world.

2 ( +2 / -0 )

zichi

interesting ideas posted at 0522pm, but there is no way in hell the J-bueaurocracy cud survive on that( my guess is thats part of your plan!!) & they have too mauch sway to allow themselves to commit harikiri even though to an extent it is sorely needed

0 ( +0 / -0 )

Care to point out where I said that. You have a habit of putting words in others' mouths...

OK,

Losing? How about lost? Korea is what Japan was 40 years old with the fight and hunger to lead the pack. Now? Nothing. Blame the education system, society and the current business ethic and culture.

Not true. Japan has lost no manufacturing edge to Korea. The Koreans simply do more lower end, less intricate manufacturing than the Japanese nowadays. They have a long, long way to go if they want to challenge the dominance achieved by the Japanese in advanced manufacturing.

-1 ( +1 / -2 )

I don't think I said "dead", did I? Japan is slowly getting its butt kicked. Continue to live in Lalaland about this but in 10 years, I bet you'll be buying Korean goods. How's Sony, Panasonic, Toshiba... all doing business wise? Oh, right. massive problems...

-2 ( +1 / -3 )

Oh and I guess we can add NEC to the list... http://www.japantoday.com/category/business/view/loss-making-nec-to-cut-10000-jobs-worldwide

-2 ( +1 / -3 )

I don't think I said "dead", did I? Japan is slowly getting its butt kicked. Continue to live in Lalaland about this but in 10 years, I bet you'll be buying Korean goods. How's Sony, Panasonic, Toshiba... all doing business wise? Oh, right. massive problems...

Oh another line then,

Ogi, sadly, your line of thinking is what is causing the destruction of the Japanese tech worldwide

Japan is not slowly getting its butt kicked, it's keeps on strengthening its position in advanced manufacturing. That's a fact, but it doesn't fit in with the image of Japan in horrific decline that you prefer, so you choose to ignore it.

And the I-Phone address is still there. It is totally reliant on Japanese technology, since Japan's policy towards increased investment in advanced manufacturing has left it with near complete monopolies in certain areas, with only Japan able to make certain components that are essential for every electrical device in the world to work.

-1 ( +2 / -3 )

The minimum wage should be increased from about ¥750/hour to ¥1,000/hour.

1 ( +1 / -0 )

Want to pay the debt? Raise the retirement age, tax the rich and cut the wages of the amakudari pseudo retirees sipping coffee at the place they used to actually work. Invest in things that will get the people moving instead of building roads to nowhere. Raising the consumption tax will send consumption into a downward spiral. That won't help the economy.

It would also help to back off off the crackdowns on illegal parking and zero tolerance drinking and driving policy, and also lighten up on bar owners. All these things are killing the recreation that used to enable the Japanese to slave away. Now they are robots in the night time as well as the day time and its not helping anybody.

-2 ( +0 / -2 )

Do you know the meaning of dead and destruction? You are grasping at straws and anyone reading can see this.

I didn't bother with your iphone comment because it is laughable. Just like your comment about "Japan is not slowly getting its butt kicked, it's keeps on strengthening its position in advanced manufacturing" is.

-2 ( +0 / -2 )

For once, I agree with you pizzaface! Heck, the revenue they could get out of speeding tickets, failing to stop at stop signs and crosswalks, speeding....

-2 ( +0 / -2 )

Anyone with half a brain and a calculator could reach this conclusion. Shrinking economy plus aging population and 211% debt to GDP ratio means more taxes. Or default. No grey area here.

-2 ( +1 / -3 )

"more taxes"

How about cut spending?

0 ( +0 / -0 )

I still think it's amazing that until 1989 Japan had no consumption tax and a booming economy.

0 ( +0 / -0 )

@oginome keep thinking like your still in the 80s and this boat you call japan will sink even faster, fact is Samsung LG Korean electronics makers have the largest market share in TVs, computers in the US and the gap is just getting bigger. Japanese electronics while still good are way over priced. It wont be long when most of Japanese companies will be manufacturing overseas with the majority of there workforce made up of gaijin, how proud will you be of yourself/Japan when the people who benifit the most from Japanese companies investments will be gaijin. LOL

1 ( +3 / -2 )

@issa1 Japan is the locomotive of Asia. Korea and China are just copycat of Japanese technology and END POINT. copycats!!/ and what did Japan do during the 70s 80s, umm they invented all there own products!,LOL almost everything Japan mass produced was invented by foreigners. Its small minded inward thinking people like you is why Japan has been stuck in stagnation for the last 20+years. comon Japan the 80s are over never to return, now youve got serious competition from cheaper hungrier asian countries better come back to reality before it to late!!

1 ( +2 / -1 )

Mr. Takahashi Yoichi, a dropout bureaucrat says referring to a chief economist of IMF that the job to set the national finance in order should not be a sprint game but a marathon, it will take more than 20 years to reduce national debts to a proper level. Slow but steady wins the race. It's senseless to urge Japan which has been plagued with deflation and slack economy for years and newly stricken by a natural disaster to raise consumption tax. It's like asking a seriously injured person to donate his blood. What Japan should do now is to increase money supply and raise the nominal GDP. Appropriate macroeconomic measures will increase tax revenues and as a result dispense with sales tax increase. At the same time dispose of those quasi government corporate bodies swarming with bureaucrats like termites that dissipate 12 trillion yen of tax money annually, which is just as much as will come into revenue by 5% sales tax increase. Don't be fooled easily out of our money by Noda and his mastermind the Finance Ministry.

1 ( +1 / -0 )

Do you know the meaning of dead and destruction? You are grasping at straws and anyone reading can see this. I didn't bother with your iphone comment because it is laughable. Just like your comment about "Japan is not slowly getting its butt kicked, it's keeps on strengthening its position in advanced manufacturing" is.

You clearly don't get that advanced manufacturing is on a higher level and completely different from making tvs, electronics, computers. Nothing is dead, Japan's dominance in advanced manufacturing is not questionable and is growing. The I-Phone is reliant on Japanese technology to run, the producers hired by Apple to make the components for the I-Phone depend on higher end Japanese technology to create what they need. You don't get it, even though it's been explained so many times now.

oginome keep thinking like your still in the 80s and this boat you call japan will sink even faster, fact is Samsung LG Korean electronics makers have the largest market share in TVs, computers in the US and the gap is just getting bigger. Japanese electronics while still good are way over priced. It wont be long when most of Japanese companies will be manufacturing overseas with the majority of there workforce made up of gaijin, how proud will you be of yourself/Japan when the people who benifit the most from Japanese companies investments will be gaijin. LOL

Japan has specialised in advanced maunfacturing that gives it the edge over, well basically everyone. The Koreans can stick to making tvs and computers (lower end manufacturing). Japan dominates the field in advanced manufacturing, every company in the world is reliant on the different types of intricate, extremely complicated components that only Japan know how to make as a result of the monopoly they've gained.

0 ( +1 / -1 )

Too bad there isn't a super computer determining every single human beings personal tax rate. Currently, it is a all for one and one for all tax system, but in reality people are taxed for many things they don't use or need.

0 ( +0 / -0 )

well that settles it then... after all the IMF is such a shining example of successful policies...NOT!

I will gladly pay the increase of the sales tax, as soon as the government here in Japan makes cuts all agencies across the board by an equal amount... starting with the salaries of ALL government workers.

0 ( +0 / -0 )

@oginome Name them...... you have kept saying everything,(I get it YOU think Japan is still ahead) but you have not put out a single piece of data........... so you can't change my mind "Japan's dominance in advanced manufacturing is not questionable and is growing" then give us stats!!! If there is no question that they are growing then it shouldn't be hard to give us some facts........??? GDP... Example's of Japanese technology in products that are not the Iphone......

Um, the unemployment RATE is per what the population is at that time.

......... Decreasing Labour Force and Decreasing Number of jobs........ unemployment RATE would still stay at the same level......the unemployment RATE will most likely say in the 4% from now until 2050....... but hey don't take my word for it here is the UN report from 2000 when they first started talking about it...

http://www.un.org/esa/population/publications/popdecline/Katsumata.pdf

Did the GOJ act on the UN report...... no....... will they act on what the IMF says.........

0 ( +0 / -0 )

Name them...... you have kept saying everything,(I get it YOU think Japan is still ahead) but you have not put out a single piece of data........... so you can't change my mind "Japan's dominance in advanced manufacturing is not questionable and is growing" then give us stats!!! If there is no question that they are growing then it shouldn't be hard to give us some facts........??? GDP... Example's of Japanese technology in products that are not the Iphone......

Japan's dominance in advanced manufacturing is the truth.. I've already listed many chokeholds and specialties, the facts are there. All those semiconductor companies you listed on the other page? They are ALL 100% dependant on Japan for semi conductor grade silcion.

Did the GOJ act on the UN report...... no....... will they act on what the IMF says.........

The IMF is heavily dependant on Japanese money for its survival.

0 ( +1 / -1 )

Ogi, have you bothered to read other people's posts? ot juts me who is having a chuckle. You were asked to name companies. Go on then, Name them. Name the products the Japanese are taking the world by storm with. I can name numerous Korean examples - LG, Hyundai, Samsung.. You've got Toyota... which is laying people off and just lost the market share in the US... Keep your hand in the sand and tell yourself it will all be okay if you like. Reality is very different.

-2 ( +0 / -2 )

Ogi, have you bothered to read other people's posts? ot juts me who is having a chuckle. You were asked to name companies. Go on then, Name them. Name the products the Japanese are taking the world by storm with. I can name numerous Korean examples - LG, Hyundai, Samsung.. You've got Toyota... which is laying people off and just lost the market share in the US... Keep your hand in the sand and tell yourself it will all be okay if you like. Reality is very different.

Tmarie, have you actually read any of the posts yourself? Japan has gained numerous chokeholds in producer's goods, they've monopolised the production of the kind of highly sophisticated components that are essential for all producers to have in order to create their products. These components represent the highest end, most intricate and capital intensive elements of manufacturing. LG, Hyundai, Samsung are all heavily reliant on these components for their products to even exist. Murata is the sole maker of capacitors in the world, capacitors are needed for virtually every electrical device to work, Shin Etsu and Sumco for semiconductor grade silicon, Toshiba provides NAND memory chips, Toray specialises in composite material, Sumitomo in laser diodes, OFS specialise in optical fibre, the list goes on and one. Get your head out of the sand, tmarie and give yourself the manufacturing education you desperately need.

-1 ( +1 / -2 )

Readers, please stop bickering. Focus your comments on what is in the story, not at each other.

0 ( +0 / -0 )

@oginome Samsung just anounced today that they posted record sales this year of $140BILLION!!!. and who do you think is losing sales to them. Japanese electronic makers. Japan can have all the techology in the world but if they dont make products that people want to buy "AT AFFORDABLE PRICES" then they will continue to lose sales to companies that do eg Samsung LG. FACT

0 ( +0 / -0 )

Samsung just anounced today that they posted record sales this year of $140BILLION!!!. and who do you think is losing sales to them. Japanese electronic makers. Japan can have all the techology in the world but if they dont make products that people want to buy "AT AFFORDABLE PRICES" then they will continue to lose sales to companies that do eg Samsung LG. FACT

Every Samsung product requires Japanese technology to function.

0 ( +0 / -0 )

Funny how people don't see the big picture. The consumption tax started to help the IMF. Now that they are in trouble with the Eurozone countries they need money to fix it. Where do they get it? From wealthier countries who know that helping these poor countries will stabilize exports to them. So they make up some semi-truths to increase the consumption tax to help provide funds to the IMF.

It's like the liquid issue at the airports. You can't bring in bottled water through the security gates. However, once you are through, they sell bottled water for $5 each. Why? So they can pay the security agents.

You don't believe it? Airport security limits liquid carry on to 3 oz. What good does that do if 5 of you go on the same plane and carry 3 oz of liquid explosive each? You still get 15 oz regardless if one person carries it on or 5 people carry it on.

0 ( +1 / -1 )

The IMF's senior advisor or witch doctor has been misreading his or her tea leaves. The worst thing that Japan can do to itself at this moment is to raise the consumption tax at all, much less to 15%. Japan is in the midst of a 20 year recession on top of the global depression that began in 2008 (let's not mince words). The people in this country are hurting economically and the general mood now is anti-consumption. Young people are not buying cars in record numbers, for example, and "brando" item consumption is also on the decline. The higher a consumption tax goes the more reluctant people will be to consume. As the late Milton Friedman might say, "It's as simple as that." Furthermore, a hike of 15% will send a lot of people already on the edge over the edge. Whatever the government will gain in taxes they will have to either spend on welfare if they are humane or on prisons if they are not.

Part of Japan's economic woes are predicated on Japanese not reproducing themselves at an economically feasible rate. They are not doing so because children are a financial burden. Children are going to be even a bigger burden once any sort of hike in the consumption tax goes into effect.

In sum, hikes in the consumption tax will lead to a reduction in consumption and in the already declining birth rate.

Europe sticks people with a value added tax (VAT) of 25%. Europe is no model for us here in Japan. That fact is under your nose.

1 ( +1 / -0 )

The IMF in my humble opinion is full of BS! Raise taxes to Japan's already extremely weak economy?? Sure, we have a hoarse that has injured one or two of it's legs, so this final blow, raising sales taxes in Japan sky high, is to me like shooting the injured hoarse with a 38 caliber pistol right through the brains, so IMF please go to HELL!! Time to REFORM the CORRUPT IMF asap!!!

0 ( +0 / -0 )

All warfare is based on deception.

-Sun Tzu

Consider these facts about Japan:

It's the world's number one creditor: http://online.wsj.com/article/BT-CO-20110523-713266.html

Its major corporations have over 2.4 trillion dollars of cash: http://www.bloomberg.com/news/2011-05-30/sony-leads-japan-inc-circling-takeovers-with-2-4-trillion-cash-real-m-a.html

Its households have 19 trillion dollars in financial assets: http://www.bloomberg.com/news/2011-09-20/japan-household-assets-rise-for-first-quarter-in-five-boj-says.html

It is the "Microsoft" of factory automation: http://www.businessweek.com/magazine/content/10_49/b4206044280596.htm

Strategically It is in Japan's national interest to keep telling the rest of the world how weak it is when the opposite is true.

1 ( +2 / -1 )

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