politics

IMF urges Japan to triple consumption tax to reduce debt

36 Comments

The requested article has expired, and is no longer available. Any related articles, and user comments are shown below.

© 2012 AFP

©2019 GPlusMedia Inc.

36 Comments
Login to comment

Please, put the tax up! then we can move on...

-5 ( +1 / -5 )

Make a decision

-3 ( +0 / -3 )

Triple?? In a nation where everything is already ABSURDLY expensive? What planet are these guys living on? If Japan is in debt make Toyota and these major corporations pay more. I want to see the tax returns of the people who are calling for an increase in consumption tax.

3 ( +4 / -1 )

Yes NetNinja, Triple. Thats about right. Its more in other G7 countries. What is 'absurdly' expensive? Are you just using the foreign exchange rate to convert the cost of everyday goods, which is irrelevant if you are earning Yen, or the cost imported goods, which is also irrelevant as they are considered a luxury.

-3 ( +0 / -3 )

IMF is one of the worst multilateral institutions in the world and hated by many countries for their arrogant pronouncements and so called "remedies" for fiscal prudence. Lagarde should advise her own country France to clean up its act and not preach to the rest of the world. Agreed the tax in Japan is relatively lower than other countries . Perhaps the IMF could advise their Government of Japan cut the plethora of wasteful projects, reduce benefits and Government salaries as well as red-tape. But Japan funds the IMF so its a vicious cycle! The Government of Japan should STOP funding the criminals of TEPCO with $13 billion in tax payer money, stop the Yamba dam and much much more. As far as consumption tax is concerned the IMF must mind its own business, Japan has not borrowed any money from pension funds, hedge funds and other predatory economic vultures from abroad and they dont give a hoot about ratings from S & P, Fitch or whoever......

2 ( +3 / -1 )

"Tax this, tax that, tax, tax, tax.... " Funny how sooooo many humans are dependent on shaking down other humans ain't it?

2 ( +3 / -1 )

Rather than bump up tax, why dont they consider cutting down on useless spending? Has anyone noticed how many times municipal construction crew will tear up a perfectly good road just to build the same thing all over again, specifically during budget review season?

8 ( +8 / -0 )

Japan’s current tax rate on consumption is only 5%, one of the lowest rates in the world, said Anoop Singh, the IMF chief for Asia.

BAKAYARO!

2 ( +2 / -0 )

It is hard to believe this idea continues to be discussed. NO INCREASE IN THE CONSUMPTION TAX. DECREASE IN GOVERNMENT SPENDING. How hard is it to understand that an increase in tax , decreases productivity. Vote NON-INCUMBENT.

5 ( +5 / -0 )

Personally, I don't think raising the consumption tax is the answer. I'd prefer to see corporate taxes and high salary earner's tax increased. There are too many corporate fat-cats living off the tax cuts they get. Increasing the sales tax by three-fold will only increase poverty and widen the already obvious class gap in Japan thus, plunging Japan into a huge depression which will be impossible to recover from due to the declining birth rate. They have to attack the money hoarders and not Naoki Average to rebuild Japan's economy.

2 ( +3 / -1 )

****Japan will no longer be Japan if it follows rest of the world

-2 ( +1 / -3 )

Researching more in cleaner and greener energy solutions is the only solution for Japan to reduce its debts. Come on be a global leader in this area... You can do it !! Gambarey Nippon !!

-3 ( +0 / -2 )

Reasearching more in cleaner and greener energy solutions is the only solution for Japan to reduce its debts. Come on be a global leader in this....You can do it !! Gambarey Nippon !!

-3 ( +0 / -2 )

Tax avoidance in Japan is enormous, and I think they need to remove some of the loopholes as well.

For example, depending on the age of the property, there is a tax credit on interest paid on a home loan. Effectively this subsidises owner-occupiers (and indirectly the construction industry) and discriminates against renters who get no such subsidy. For investment property I can understand such a deduction, but not for owner-occupied.

I also support a rise in consumption tax, as there are a lot of self-employed people who under report income to avoid paying tax. Consumption tax is far harder to avoid.

3 ( +4 / -1 )

I'm no economist so I don't really know if this is what Japan really needs.

What I do know is that it will take Japan 5 TIMES as long as the rest of the world to decide what it needs to do. Perhaps this is the underlying problem.

3 ( +1 / -0 )

Japan is in a very difficult situation. In the 2012 budget, the government is projected to take in 46 trillion yen from taxes and other non-loan income. Nearly half of it (about 22 trillion) will go toward servicing the national debt. After adding social security spending, (about 26 trillion), Japan is now 2 trillion yen in the hole, and this leaves out defense, education, infrastructure spending, healthcare, and all of the other things the Japanese government does. This is an even worse situation than the US government's budget situation, which is pretty dire. The Japanese government plans on funding its obligations with over 44 trillion in loans, which is almost as much as it receives in actual income! There's no way the Japanese government could tackle its debt when its deficits are almost as high as its income, and when servicing the debt consumes half of it.

Raising the consumption tax from 5% to 15% to solve Japan's deficit problems is like a firefighter upgrading from a water gun to a garden hose to fight a city-wide fire. It's so sad to see Japan in the flames of massive debt and expanding deficits. Japan is a very inspiring place, in my opinion, but its government's massive debt and chronic deficits threaten the well-being of the nation. Since the yen's strength is tied to Japan's ability to pay its debt, this has profound consequences for holders of yen (e.g., Japanese people). Given Japan's financial state, it's somewhat odd that the yen is so strong. Then again, that may be because the yen is compared to the currencies of other debt-encumbered areas like the US and the EU. This is just a guess (please correct me if I'm wrong), but I believe much of Japan's debt is bought by Japanese banks (such as Mizuho), while much of America's debt is bought by the Federal Reserve. I think this explains why there hasn't been much price inflation in Japan since the bubble era ended, while price inflation in America has been growing steadily.

I don't have any good solutions, but unless a combination of radical spending cuts, privatization, selling off of publicly-owned property, and explosive growth in Japanese industry and exports occurs, Japan will be forced to either print its way out of its debt problem (leading to hyperinflation à la Weimar Germany in 1923, which would devastate Japan) or look into repudiation (which could also destroy the value of the yen since it is not backed by anything). This is the future of the EU, America, and other heavily-indebted regions/nations, too, if they do not reverse their years of debt accumulation and chronic deficits.

2 ( +3 / -1 )

“In some way (increasing) the consumption tax is the most appealing measure to take,” Singh said.

Appealing?

Singh should try singing a different tune!

3 ( +3 / -0 )

Raise the retirement age to 70 ASAP.

1 ( +2 / -1 )

“It has been our sense… that raising the consumption tax gradually, not immediately, beyond 2015 to say 15%, would be more in line with the tax rate in other countries,” he said

This is the Incrementalism method. Small frequest increases in taxes and the peasant won't argue.

Or announce a huge increase and then push thru the actaul increase you really wanted anyway and the peasants go 'well thankfully we didn't get stuck with that huge increase they threatened' and then they don't argue

0 ( +1 / -1 )

I urge IMF to shut the hell up.

Consumption tax with no consumption is useless.

They should lower it and allow free trade to raise consumer confidence!

2 ( +3 / -1 )

govt spending creates jobs which creates consumer spending. if those consumers spend, then its a good thing. if they save then we are in trouble. japan is a country with a fav pastime of spending. now if govt spending goes to construction with those construction pwople spending this cash on pachinkos, then only a few benefit like the yakuza. so where should spending be allocated. education? that tajes decades to realize. OBVIOUSLY economics is the hardest subject to figure out due to the million variables. world peace is another. because of the greedy few powerful on top, nothing can be done, except to move and find the next booming country to live in.

-3 ( +0 / -2 )

This will effectively be a regressive tax. Some increase is necessary, but there are already hidden structural taxes, which are the cost of living or doing business in Japan, such as inefficient distribution and lifetime employment of unproductive deadwood.

Other steps that need to be taken:

raise the retirement age

lower pension payments

increase health insurance deductibles

increase health insurance costs of free-riding elderly
1 ( +1 / -0 )

i have to disagree with Michael. debt in theoey and as we are seeing can be refinance by issuing more debt forever. japanese people keep buying jbonds (lending money to the govt) and are not asking for much in return. in 10 years when they are due, govt issues more bonds to pay that person back. after he gets paid, he uses his money to buy bonds again, lending his money out. circle. so when people stop being patriotic and everyone stops lending to the govt for very low interest, then were in trouble. just for your info, i used to work for a mutual fund company that serviced japan post. they pay us in japan saving less than 1%. they take that money and invest it in a fund that pays 3 or 4%. and im sure that the j govt does the same as well. im not sure whar one poster said about 2012 budget, but in sure the j govt has more than u think, especially when they can afford to give the EU billions in loans they will never see again.

-1 ( +0 / -1 )

Japan has a low consumption tax but a whole bunch of taxes that other countries don,t ..Also it was often the case that when a consumption tax was raised overseas other existing taxes were cut and exemptions granted in exchange to sell the consumption tax increase to the sceptical public politically. No such trade offs are being even suggested let alone talked about by Jgovernment.

1 ( +1 / -0 )

Japan absurdly cheap I reckon, as an Aussie. Price and quality may be a different kettle of fish but you can live very cheaply here. Even supporting my family and paying for private life insurance for three, I could still save 70,000 in Aus in two yrs. healthcare is cheaper but the doctors blow. Daycare here wins hands down. Free meds and doc fees for infants? Only Cuba beats that. My monthly blood pressure and heart meds are cheap as chips here. Cheaper better internet. I could go on. 15 is about right but if I had to pay that and was still finding one yen coins in my wallet would catapult them at the Diet building's windows. Fix the one yen aluminium shrapnel first, Japan.

0 ( +2 / -2 )

The IMF should keep its nose out of Japan's business. Speaking of the IMF ... how much money has that orginazation thrown down the drain? Thus ... are those people really good at economics?

1 ( +1 / -0 )

In a nation where everything is already ABSURDLY expensive?

I wouldn't say Japan is that expensive (aside from fruit and veg!) in terms of salary/prices ratio... it's certainly not cheap, but could be a lot worse!

0 ( +0 / -0 )

These Economists could not be more incorrect. Japan owns its debt, so it is not really an issue. It is a matter of time before the Government transfers the citizens money that sits in Government bonds into other forms of investment.

Japan's population is aging and declining so rapidly that in another article I read that Japan's population could only 30% of what it is today, so fall from $135 million to about 40 million, if birth rates do not rapidly increase and the country generate the growth to support a higher birthrate and the massive number of old people when the life expectancy for women hits 90 and for men, 84.

Keep taxes low, remove a number of structural barriers to efficiency and lower cost in Japan, such as reducing layers of middlemen, and reducing favorable treatment of small farmers. Government spending should be allocated towards investment, business encouragement & support and incentives to the country's young people to continue to be creators and makers of products which contain high value, not so much sales people, media developers/distributors, social media and service industry people, which is the trap the USA has fallen into.

Finally, stop lying to the people about Fukushima, take interest rates back to market rates, such as 3% so money will have value. And when Japanese companies invest and acquire, integrate with Japanese parents, make the companies more valuable, and figure out to do valuable things in Japan based on the learnings from other countries.

0 ( +0 / -0 )

These Economists could not be more incorrect. Japan owns its debt, so it is not really an issue. It is a matter of time before the Government transfers the citizens money that sits in Government bonds into other forms of investment.

wnagler1 -- nonsense. Please stop with the simplistic "Tea Party-style" solutions. They won't work in the U.S. and they won't work in Japan. "Owning' the debt does not change the amount owed or the cost of carrying that debt. At 211% of GDP, and re-payment and interest costs annually eating up a huge share of the federal budget, they have no choice but to raise taxes. What is it about the fact that the J-government took in less last year in tax revenue than it borrowed that you can't figure out? The only saving grace in owning the debt is that the government can continue to pay a ridiculously low interest rate. But even that will change as the population and savings shrink and it must look outside for funds.

-2 ( +1 / -3 )

Well, leave it to the IMF for unbiased and intelligent advice. Triple the consumption tax.

Brilliant!

One simple move that would solve ALL Japan's financial problems!

But why stop at triple?

50% consumption tax would make an extra margin that would ENSURE economic stability.

Why should a 350ml can of beer be ONLY 220 yen? It should be at LEAST 500 yen!

Increase taxes ten times and increase the pay of Japan's wonderful politictians - give them BIGGER BONUSes!

Gosh, they deserve it!

-1 ( +0 / -1 )

Japan's debt at 1% and the financial instiutions still buying them in bunches just means it's a net sum zero game on Japan's balance sheet. Majority of the pensions that are paid to the senior citizens simply goes to their respective savings account which in turn is invested by these financial institutions to buy more 1% debt. It's a deflatinary cycle within its own house that will not cause a "bankruptcy" for that only happens when Japan can no longer raise money within their own peoples. A worst case scenario would be for Japan to simply print more yen to pay off the yen denominated debt which will cause inflation to an extent but consumption tax is literally the same thing because it will raise prices.

2 ( +3 / -1 )

A worst case scenario would be for Japan to simply print more yen to pay off the yen denominated debt which will cause inflation to an extent but consumption tax is literally the same thing because it will raise prices.

I totally agree.

IMF, please, leave Japan alone. Japan's debt has NOTHING in common with the European debt. The major issue for Japan is the demographics and the aging of the population. I think it is necessary for the Japanese government to provide motives to young couples to have more children.

1 ( +1 / -0 )

We all know how wildly successful the IMF has been at managing their OWN situation (not), so their advice is about as valuable as a prostitute's advice on chastity.

0 ( +0 / -0 )

about as valuable as a prostitute's advice on chastity

I'd say a prostitute has some valuable advice to offer on chastity.

1 ( +1 / -0 )

An IMF paper from last year, which seems to be the basis for the repeated recommendation and which contains some interesting international comparisons: http://www.imf.org/external/pubs/ft/sdn/2011/sdn1113.pdf

0 ( +0 / -0 )

"current tax rate ion consumption is only 5%, one of the lowest rates in the world"

We can't help it if most of the rest of the world has too high tax rates! If Japan triples it to 15% and triggers a deep depression, will the IMF come to the rescue?

0 ( +0 / -0 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites