Sales tax goes up for first time in 17 years

Is this one of those "April Fool" news stories?

My wife said the dry cleaners was full of people yesterday handing in piles of clothes in order to save 3%. This morning we got a leaflet from the same cleaner: "50% off".

A leaflet from the supermarket also shows many goods still priced at Y98 and Y198 (tax included).

It looks like those who didn't panic buy may be able to pick up some good deals over the next month or so as shops try to keep people coming in.

After working very closely to promote the outbound tourism industry from Japan (i.e. exporting bodies with wallets) for thirty years, I got transferred to Indonesia (Bali and Jakarta) just as the Asian Contagion started (from Thailand, they say triggered by none other than Mr. G. Soros), and spread throughout the region affecting the globe ultimately.

It devastated Indonesia's economy, where the rupiah fell from a pegged 2800 per USD to almost 14,000 per USD eventually settling around 10,000 (like the Korean won)... What's the point, you ask?

Well, it seems stuff like this tax increase (or the one in 1997) is being conveniently used as a smokescreen to conceal the reality that the central government is fiscally inept and has to boost tax revenue to support their own self-serving and avaricious goals. They would have us believe for the past 17 years that the blame lies with consumers who have "snapped their wallets shut" - it's the consumers who are being poor economists who don't understand you have to spend to create/sustain wealth.

Wouldn't consumers be happy to spend if their bosses would only give them raises now and then? Wouldn't companies be willing to do so if Japan didn't have such onerous taxes already? No, blame the consumer and conceal their own self-serving policies.

Of course, they could owe up to their own fiscal mismanagement and avariciousness. "Oh, those weren't political contributions, they were personal loans! " "I'd already forgotten about it..." Or, "I bought a fortuitous rake."

No, I think urban Japan is fine not being among the most expensive cities in the world. Let Hong Kong, Singapore, Paris and New York all have that higher cost of living. It's a sobriquet that testifies to all of those places diminishing quality of life, and alarming chasms between the have's and have-not's. We don't need that here... not in Japan,... not where we can still see (more or less) each individuals contribution to the community and society-at-large... where poverty has not rooted in endemically...

Hopefully if salaries don't rise (which I think will be true for 85% of people in Japan). Products can get cheaper by technological innovations and cutting out some of the bloated quasi-parasitic middlemen's part of the high prices.

Until now, I've been moderately frugal. From now, however, my spending will be on a truly "as needed" basis. You could say I'm on strike .

It is a bit galling to see Taro Aso sitting smugly on Tv and realise that Im helping pay for his retiremnet however minimal.

So many Japanese don't mind flocking to Hawaii or anywhere outside Japan and paying upwards of 5% in tax but can't stand to pay that at home? It'll be interesting to see what they won't mind paying if and when their economy goes bust.

@Nichikolohe

Don't be swayed by the poster's "masterful" command of the English language - you can get your point across without typing as if you're writing a speech. Also, a lot of your points are incorrect.

1 USD = ~1000 won, not 10,000

The blame does lie on consumers, but also on the government in the same way that the 07-08 financial crisis blame lies on both parties: in 07/08, consumers were at fault for taking loans well beyond their means, while the institutions/govt were at fault for such relaxation of credit. Now, the problem is that the savings rate is so high, so any potential increases in salary will just go to savings. So yes, it is the consumer’s problem.

Companies have effective tax rates that are well below whatever numbers you chose – corporate tax rates can largely be avoided/reduced.

Every government has a certain degree of corruption, some more than others – the fact that you hear more about it in certain areas doesn’t mean it is more rampant.

Japan is still among the most expensive cities in the world, even with the depreciation of the yen. Also, there is no diminishing quality of life in any of the countries mentioned – as a whole, demand is actually high in HK, Singapore, NYC, and to a lesser extent, Paris, since they present more opportunities and offer higher salaries versus other respective comparable cities.

It’s great to blame the government and the economy, but people have to realize that part of the blame is on themselves, whether it be a failure to educate themselves on basic economics/sentiments or just directing their hatred for their unfavorable life situation towards any scapegoat they can find.

Very good rebuttal ryuusei. Thanks

" Now, the problem is that the savings rate is so high, so any potential increases in salary will just go to savings. So yes, it is the consumer’s problem."

Saving for the future is what SMART people do.

" corporate tax rates can largely be avoided/reduced."

Unlike the average Taro who can't pay a team of tax lawyers.

" It’s great to blame the government and the economy, but people have to realize that part of the blame is on themselves…"

Yes, which includes feeding the beast and being endlessly compliant sheep.

Exactly John. Compliant sheep is a good way of putting it.

Well Abe has raised the consumer tax but lowered the corporate tax. He wants to welcome the corporations with a red carpet, but screw the consumers by making them pay for the off-balance. This is basically what the tax hike is all about; it's about making the people pay for whatever economic adjustments that the government needs to make.

It looks like this has been his plan all along. The "patriotic" Abe has "sold out" his nation and its people yet again. And the "patriotic" right-wingers cheer on for Abe because he had visited Yasukuni or some such nonsense.

@John Galt

You're confused as to what savings rate means. A high savings rate is not necessarily good when your currency is depreciating and goods are becoming more expensive. Saving for the future is good up to a certain point, where afterwards you start to see adverse effects.

"Smart" people, as you put it, understand the limitations of their income and how best to invest their income so as to not lose out to the "time value of money". Putting it all into savings, with virtually no interest rate, is NOT the way to approach this.

@Thomas Anderson Again, you say that Abe has "sold out" his nation, yet this is probably something you've heard on the news countless times. Any time there's change in the world, people will oppose it. I'm not saying he's the greatest person to lead Japan, but he's definitely made some bold moves that will have global implications, for better or for worse.

" You're confused as to what savings rate means. A high savings rate is not necessarily good when your currency is depreciating and goods are becoming more expensive. Saving for the future is good up to a certain point, where afterwards you start to see adverse effects."

@ryuusei, and why is it that the currency is depreciating but for the BOJ's QE-to-infinity policy?

Product prices are rising for that very reason. Previously, prices were mostly stable, or declining on tech products, as they should during product lifecycle, which the government dislikes. Instead, the bad policies of the government penalize responsible people. This is also exasperated, or more accurately precipitated by fiat currency systems which are easily manipulated by the central bankers.

The government is also mulling another rise to 10%, still modest compared some nations’ consumption tax.

Modest compared TO some nations. The consumer does not look at the rates of added taxes wherever they are levied. They look at what they pay in the end for a product or service and like bruinfan indicated the middleman's cut here is still too high, putting a disputable heavy burden on people, especially since in this country it is a flat rate on all purchases: food, entertainment and luxuries.

@John Galt

The point is not about blaming the govt, it's about people's habits and how they may be good when the currency is appreciating, but not when it's depreciating. A high savings rate lowers flexibility when things change as well as hinders diversification.

Increasing product prices are natural in a steady state environment w/ modest inflation. You don't see wage pickup because it's a lagging factor, which will come later. Econ dictates that if prices are increasing and purchasing power is being eroded, people will purchase more now than later, which is occurring.

People will always complain about prices, but it's all relative to their own incomes.

@ryuusei

Thanks for the post. Some are not well informed and it helps clarify a few important points.