Interesting things will happen for consumers at midnight March 31

TOKYO —

Imagine this: It’s 11:58 p.m., March 31, 2014. You’re in a convenience store, lined up at the cash. The customer ahead of you has a bento. Will he want it warmed up?

11:59. One minute to midnight. Yes, the customer does want his bento warmed. It’ll take a few seconds. Your heart sinks. Midnight will have struck by the time you present your purchases. You’ll be paying 8% consumption tax, not 5%.

Big issues swirl round the April 1 consumption tax hike. Will it strangle the economic recovery? Will it help the government keep pace with the aging nation’s staggering and growing welfare costs?

Then there are the little issues. How will it hit you - not long-term but at the moment of implementation? How will it feel, that first bite it takes out of your wallet? That’s the angle Shukan Gendai (Feb 22) selects for its coverage. If it lacks the gravity of highly credentialed experts interpreting and debating reams of nationwide economic data, it boasts at least a concreteness and a certainty the expert analysis cannot match.

So – back to the convenience store cash. “It would have been better to make the change at 2 or 3 a.m., when there are fewer customers,” one nervous store manager tells the weekly. “But,” he grumbles, “headquarters makes all the decisions.”

That’s true both in the sense he means – that individual convenience store franchises must toe the central line – and also in another sense: the precise time that the tax hike takes effect is not mandated by law. Each enterprise decides for itself when “April 1” begins. So while most convenience stores, their cash registers operated by central computers, seemed geared for a change precisely at midnight, many 24-hour restaurants have in effect taken the convenience store manager’s advice and opted for a later change, giving late-night diners a break.

Same for late-night train passengers. The last train on March 31 may run past midnight and therefore into April 1, but in most cases the fare will not go up until the first trains head out the following morning.

Taxis. Here things get interesting, and confusing. Each taxi company has its own policy, but to the extent that one leading Tokyo cab firm is representative, it will work something like this. Taxi meters are not centrally controlled; each one must be changed individually, which takes a bit of fiddling. So cabs that hit the street before midnight will be charging 5% all night and into the morning, while cabs that leave just after midnight – well, it’s your hard luck if you flag down one of those. You might want to ask the driver before you get in, Shukan Gendai suggests.

Warning to Internet shoppers. You might think that by placing your order in late March you beat the system. You don’t. Here the law does get specific: tax is charged based on not on the order date but on the shipping date. Ordering in March and receiving in April? You pay April taxes – 8%. “There’s not a thing we can do about it,” says a spokesperson for Internet shopping mall operator Rakuten. “It’s a national tax office stipulation.” A notice on Rakuten’s home page makes that clear.

  • 14

    titaniumdioxide

    The old population is such a burden. Tsk tsk. Can't they just tax the rich seniors.

  • 20

    bilderberg_2015

    They should just raise the tax on tobacco 300%. So many addicts in this country, they'll make billions through the tax revenues.

  • 9

    Graham DeShazo

    I saw the laughable govt propaganda CM on this the other day. No I'll effects at all! It'll help the elderly, won't hurt businesses, young people, or consumers!

    You know, there are valid arguements for raising the consumption tax (we stuck our govt heads in the sand for 30 years is not one of them.), but to pretend that there are no costs associated with increased taxation is disingenuous.

    As the man said, don't pee on my head and call it rain.

  • 16

    Garthgoyle

    So what sort of interesting things will happen for consumers at midnight on March 31st?

  • 7

    TrevorPeace1

    Garthgoyle, those consumers will not, I guarantee, see a wage rise that offsets the increased tax, and will therefore become poorer. That's the interesting thing. This will drive to slightly lower consumption on non-necessary purchases and more concentration on simply existing.

  • 6

    kimuzukashiiiii

    bilderberg, as a ex smoker who still dabbles socially, I completely agree.

    If not just for health alone. ¥440 a pack is too cheap.

  • 2

    papigiulio

    bilderberg for PM! Unfortunately it will never happen, many of the people upstairs are also smokers. On top of that the J-Gov is heavily sponsored by JT. We can only hope......

  • 3

    FightingViking

    And I was SO hoping this 8% consumption tax was an "April fool's" joke..

    Can't they just tax the rich seniors .

    Not all seniors are rich...

  • 0

    JohnDigsJapan

    Well, in my county, the tax is about 10%, so it's not so bad. But I do agree about raising and taxing the heck out of smokers. But if they do, I hope that that revenue would go to the proper place.

  • 11

    crustpunker

    The biggest difference is that in Japan, while 8% might seem to be lower than other countries it is an 8% tax on absolutely every single item and service. All of them. Think about each item or service you pay money for in a month, add your total costs up and THEN add 3% on top of that...it will be a massive hit for usual households and undoable without serious budgeting for lower income earners. Unless, there is a wage increase to offset the tax increase, I really dont see how alot of people are going to be able to deal with this. 2 meals a day instead of three maybe?

  • 9

    kurisupisu

    This tax is on food,baby clothes,books, newspapers,internet services.medicines,fuel etc -most of these items are necessary and must be bought regardless of income.

    The ailing Japanese consumer is getting shafted even more so this year!

  • 8

    sengoku38

    People will suddenly stop buying things on 4/1, which will crash the Nikkei and cause people to lose confidence in the economy. This will crash the economy for at least 10 years.

  • 5

    JustAGoodOleBoy

    On a side note, I am really not looking forward to the pocket full of 1-yen coins I will invariably end up with due to this change. (pun intended)

  • 5

    Laguna

    My son is already at college in the US; my daughter will follow him in 2016, so my wife and I are looking forward to that time in life when we pretty much only buy food and beer (and not much - of the latter, at any rate).

    I feel sorry for younger couples just starting out.

  • 2

    HaraldBloodaxe

    That is the most generous usage of the word "interesting" I have seen for quite some time.

  • 4

    Damien15

    I needed a motivation to keep my purchases to minimum anyway.

  • 0

    sighclops

    "Interesting"

  • 2

    sharkeisha

    you can rest assured there will be no wage increases at all even if the increase ends up not having as positive effect as the government says it will. at least by domestic companies.

  • 2

    Nessie

    I'm curious about prices, because I think there will be a lot of fire sales, particularly of electronics, after the tax goes into effect and the pretax buying rush is over.

  • 4

    Seawolf

    Well. in the place I live, all convenience shops close at 23.00 sharp. How interesting is that?

  • 5

    Kabukilover

    There will be a quite tax revolt. People will cut back in spending. They will become even sharper bargain hunters. They will find cheaper apples. There will be fire sales as consumers cut back on new gajets. Wages will not go up, of course. But people might be saving more by buying less. And not having children (extremely expensive house pets in urban society). Less money to charities. As little money as possible to NHK.

    Don't forget that people have been in a recession mode for almost two and a half decades. The high spending 80s are as dead as the Roaring 20s.

  • 6

    NathalieB

    My MIL is forever arguing how "good" Japans tax is compared to, say, the UK and US.

    Shes right in a way - Japanese are taxed way lower than we are - sort of.

    But as I never stop arguing with her, you slap 17.5% on an apple that costs 20 yen (not that the UK puts tax on fruit and veg anyway as it is seen as a staple). Now put 5% on that same apple that costs 100 yen. See where Im going with this?

    Her response is naturally that Japanese food is far superior and therefore more expensive....sigh....

  • 5

    LFRAgain

    I'm going to just throw this out there, but a 3% increase in the price of one's bento is about 14 yen. I don't think open rioting is going to occur over 14 yen. And if it does, the incensed customer needs to be slapped in the face with a wet fish.

    It's the bigger ticket items where we're going to see the biggest impact. People aren't going to riot. They're just going to stop spending

    And the much ballyhooed "Abenomics" is going to grind to a sad, ignominious halt.

  • 1

    Seirei Tobimatsu

    Why didn't gov raise by 1% each year ? Would have been less of a shock. Is gov an ivory tower I wonder

  • 2

    bruinfan

    What is interesting (yet sad), is that a situation has been created (either by design or inadvertently) where healthy fruits and vegetables will cost almost the most in the world, yet unhealthy cigarettes are still verrry cheap compared to other industrialized countries.

  • -2

    Morris135

    Here in the UK, consumption (or in our case VAT) tax - with certain exemptions unlike Japan on books, food and kids' clothing - is 20% so 8% is still on average is pretty low. Maybe however there should have been an introduction of such a varied system instead of this blanket increase? Indeed, I certainly agree with the idea of having a much heavier tax on cigarettes!

  • -2

    Dylan Otoshiro

    8%? here in the UK and Ireland I think its like 21% so for us this figure still looks low

  • 2

    wavelength

    I'm going to just throw this out there, but a 3% increase in the price of one's bento is about 14 yen. I don't think open rioting is going to occur over 14 yen. And if it does, the incensed customer needs to be slapped in the face with a wet fish.

    It's the bigger ticket items where we're going to see the biggest impact. People aren't going to riot. They're just going to stop spending

    And the much ballyhooed "Abenomics" is going to grind to a sad, ignominious halt.

    True, 14 yen for one's bento won't cause a stir, but after 20 bento's per month, adding it up for the year will take a toll on one's wallet. Add to that every fruit/vegetable you buy throughout the week, and there won't be any money left for any of those 'big items'.

    I, for one, will be watching my spending, only buying things I that are absolutely necessary, because on top of electric/gas/water bills, I don't have much free spending to begin with.

  • 1

    sangetsu03

    Here in the UK, consumption (or in our case VAT) tax - with certain exemptions unlike Japan on books, food and kids' clothing - is 20% so 8% is still on average is pretty low. Maybe however there should have been an introduction of such a varied system instead of this blanket increase? Indeed, I certainly agree with the idea of having a much heavier tax on cigarettes!

    Unfortunately, here in Japan the larger companies also control distribution channels,mand even many of the retailers, and as the few large companies wield a lot of power, they collude with each other to set minimum prices for goods and services.

    In Japan the average Japanese already has to spend twice as much for food as the average European, and many other goods are just as pricey. In Japan people spend about 12% of their income on food, in the UK the number is closer to 5%, and in the US it is closer to 4%.

    Among developed nations, Japan ranks near the bottom for "personal purchasing parity". Despite the "low" consumption tax, things like import taxes of 300% to nearly 700% are already being paid for by Japanese consumers. I am having breakfast at McDonld's having breakfast, it cost me 440 yen, in my hometown in America the same breakfast would be $2.99. Of course, after March 31st, I can add another 15 yen or so to the price.

  • 0

    cleo

    Here in the UK, consumption (or in our case VAT) tax - with certain exemptions unlike Japan on books, food and kids' clothing - is 20% so 8% is still on average is pretty low

    It's the tax on essentials like food, education (books) and the like that makes the Japanese consumption tax such a regressive tax; the greater the proportion of your income you spend on essentials (ie the poorer you are) the heavier the burden of indirect taxation is.

    There is no valid reason why Japan cannot introduce a tiered system of consumer tax, with lower (preferably zero) rates on essentials and progressively higher rates on luxury items.

  • 1

    sangetsu03

    There is no valid reason why Japan cannot introduce a tiered system of consumer tax, with lower (preferably zero) rates on essentials and progressively higher rates on luxury items.

    A luxury tax was enacted some years ago in America, and it caused a collapse in several industries which produced things like yachts, private jets, and other toys. In the end, the tax caused higher unemployment, and lost rather than increased revenue. It was one of the few taxes which has been repealed.

    The one problem with taxes is that you can't isolate their effect to a particular class or income level. Were the consumption tax levied only on high income earners, it would immediately be passed down to everyone else. And of course, increased taxes on the lower wage earners are also felt by high income earners.

    A tax on any part of the economy is a tax on every part of the economy, it's as simple as that.

  • 1

    Strangerland

    I am having breakfast at McDonld's having breakfast, it cost me 440 yen, in my hometown in America the same breakfast would be $2.99.

    But in America, the McDonald's worker's salaries are being subsidized by the government, as McDonalds does not pay a living wage. So the price of fast food is artificially deflated. You may only pay 299 at the register, but when you add in the subsidies, and the cost of the bureaucracy to managed the disbursement of those subsidies, you can be assured you are paying a good bit more than 299.

  • 1

    TravelingSales

    They are trying to tax rich seniors by causing infllation. That's what inflation is - a tax on savers - just like deflation is a tax on borrowers.

  • 1

    LFRAgain

    There is no valid reason why Japan cannot introduce a tiered system of consumer tax, with lower (preferably zero) rates on essentials and progressively higher rates on luxury items.

    That's the rub, Clea. The entire purpoe of this endeavor is to try and reduce Japan's massive public debt. Lacking a vibrant economy to power that reduction via revenue created through corporate taxes et al., Abe and Co. have opted to go for the "quick fix," i.e., tax at equal levels every consumable good available, including essentials like basic foods. This way the government -- or presumably the public debt load -- benefits from a guaranteed stream of income. People have to eat, but they don't have to own a 42" OLED TV. If the taxes were targeted primarily at luxury goods, then the result would likely be precisely what posters here have stated they would do over the long course -- stop buying things.

    If no one buys luxury goods, then there is no income generation, and the public debt remains unchanged. Tax everything at the same rate, however, and the plan to reduce the Debt isn't subject to the whims of economical prudent households.

    Now, the broader question we should all be asking ourselves is if reduction the current public debt load is our responsibility as average citizens. I would argue yes. The simple truth is this debt load can't be left unchecked. Someone has to pay it down. And it's going to be us, like it or not.

    The next question we need to ask ourselves is do we pay it down sooner than later? The most fundamental truth underpinning debt repayment in any system tells us sooner is the way to go.

    Which translates to a jump to a 10% cunsumption tax.

  • 0

    cleo

    If the taxes were targeted primarily at luxury goods...

    I'm not suggesting that they be targeted primarily at luxury goods. What I'm saying is that the basic essentials should not be taxed, or should be taxed at the lowest rate, and that less essential items should be taxed at a progressively higher rate, depending on how essential/luxury they are. I'm not suggesting that we should all be let off our responsibilities while The Rich have their bank accounts rifled till they're empty; but for the tax on everyday food staples to be the same as the tax on that 42in telly is unfair.

    The entire purpose of this endeavor is to try and reduce Japan's massive public debt.

    Then they could perhaps start by ceasing to provide free pensions to people who choose to neither work nor pay pension premiums; by ceasing to give tax benefits to families that are affluent enough to be able to choose to have one adult 'dependent'; and by ceasing to subsidise US Resort Okinawa.

    And a massive huge ginormous tax on something as quintessentially non-essential as ciggies would cut sales of coffin nails thus making the world a better, cleaner place for everyone else, improve the health of former smokers who would no longer be taking time off work to clog up doctor's surgeries with their clogged-up lungs and arteries and the health and wellbeing of those subjected against their will to second-hand smoke, which would help the Heath Insurance ledger and make the economy healthier; and we could be assured that those who continued to smoke even if it meant paying huge amounts of money to do so would be the certifiably stupid who didn't think they had anything better to spend their money on anyway.

  • 0

    escape_artist

    How exactly will ordering something on the internet using a credit card, like from Amazon -- where usually the money is taken from your card immediately, on purchase -- result in the higher tax if bought before April 1st (Japan time)? For items paid on credit, so what if the item is delivered after April 1; isn't the purchase price, which includes all taxes, determined at the time of purchase? What do the authorities intend to do, make delivery companies charge an extra fee if your March order happens to get delayed, not handing it to you unless you pay up? (And what's stopping online retailers from delaying COD shipments so that you do have to pay the extra tax, even if they could very well deliver it before April 1st?)

    I think this writer is painting with too wide a brush in the last paragraph since it seems only items paid on delivery would be affected. Some more details about this so-called "national tax office stipulation" that the Rakuten person speaks of would be nice.

    In any case, I can't see how this new blanket tax -- at every step of every process (not just the end sale), and on everything including food -- is going to help regular folks in Japan. Only those collecting the tax and the big corporations stand to gain, as usual.

  • -1

    Bear27840

    Raise the price of any alcoholic beverage or bottle 5,000 percent then watch as all of the drunkards yell and screaming including all government officals.

  • 0

    Fadamor

    But in America, the McDonald's worker's salaries are being subsidized by the government, as McDonalds does not pay a living wage. So the price of fast food is artificially deflated. You may only pay 299 at the register, but when you add in the subsidies, and the cost of the bureaucracy to managed the disbursement of those subsidies, you can be assured you are paying a good bit more than 299.

    I think you're mistaken on the use of the word "subsidized" though your overall point is accurate. If the employees wages were being subsidized by the government, then part of the employees salary would be paid by the government - which is decidedly NOT happening.

    McDonald's may not be paying a living wage, but that's only because the minimum wage laws in whatever state they're in allow them to. There are no subsidies involved. The federal minimum wage is $7.25/hour but individual states can make it higher. For example, the minimum wage in Illinois is $8.25/hour. All other things being equal, a McDonald's breakfast in Illinois should cost more than a McDonald's breakfast in a state using the Federal minimum wage because of higher operational costs. I understand that Japan has a minimum wage of ¥1,000/hour. Operational costs for a Japanese McDonald's would therefore be correspondingly higher than a restaurant in a U.S. federal minimum wage state. Those higher operational costs would naturally get passed along to the consumer in the form of higher prices per item on the menu.

  • 0

    AramaTaihenNoYouDidnt

    Curious though, what about online purchases overseas?

  • -1

    crustpunker

    stop smoking, brew your own moonshine in the tub, stop buying non essential clothing items and or accessories, learn how to repair your clothes when they have holes, sell your car and buy a scooter 50cc, shave your head if you are a man to save on haircuts, search for things to furnish your apartment or home in the trash behind furniture shops, make your own soap, eat less, cry more, read by candle at night...maybe you can get by..

  • 0

    tamanegi

    Knowing Japan there will be nothing on the shelves at 11:59pm on March 31st anyway

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