Abe gambling on sales tax hike

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  • 15

    Osaka_Doug

    Fair is fair guys.........I agree the country's debt needs to be serviced -- but why no talk about lowering government spending ?

  • 3

    Lilic

    I hope our salary got the same increase!

  • 14

    BertieWooster

    I don't see the point.

    Put the sales tax up and everything gets more expensive.

    With no wage increase, people will just spend less.

    They'll find a substitute or go without.

    Truly, Abenomics will go down in history.

    Japan will just go down.

  • 14

    FightingViking

    ...and for those who don't even have a regular salary - starvation is next... For heaven's sakes, take this damned consumption tax off of food and medicines !

  • 6

    Dennis Bauer

    As long as the culture of wasteful government spending continues the tax increase will only end Abe's political career.

  • 10

    GW

    Without massive cuts in wasteful, thieving spending most the tax increase will NOT go to cutting debt but simply be more money for govt & bureaucrats to waste as they see fit sadly!

  • -10

    Joselito Asi

    Poor choice of word "gambling" Abe gambling on sales tax hike. It is so negative.

    Abe relying much on sales tax hike is more preferable. Any other words but not gambling.

  • 7

    gogogo

    My salary is not going to be increased, yet I have to pay more sales tax and more for utilities which gives me less money to spend on the economy.

    How does this help?

  • 2

    fds

    the DJP had the right idea with cutting the bureaucracy but couldn't follow through.

    i don't see how incentives for low income earners helps, they don't have extra money to spend anyway.

    i don't see how borrowing more money to offset the effects of the tax increase help reduce the debt. seems the government is just reallocating money to their cronies, bureaucracy and big business and buying votes.

    professional politicians have no incentive to cut back on spending, its how they get elected. bureaucrats have no incentive to cut back on spending, is how they amass influence and power. until you do away with the system, it will be just business as usual.

  • -3

    some14some

    Truly, Abenomics will go down in history.

    Japan will just go down.

    exactly, so in other words Abe's gambling is not restricted to sale tax hike only.

  • 4

    BertieWooster

    Joselito Asi,

    Poor choice of word "gambling" Abe gambling on sales tax hike. It is so negative.

    I don't think so.

    Abe hasn't a clue what he's doing. He has about as much successful business experience as George Bush - next to none. And when you make decisions like this in the absence of knowledge and experience, EVERYTHING is a gamble.

  • 2

    Disillusioned

    This is not only political suicide, but also economic suicide. Just last week an increase of consumer prices was recorded, which is in anticipation of the sales tax hike. If the sales tax is increased by 3% it will mean a 5% increase at the check out. The planned 5% increase will mean a 10% increase at the check out. Corporations have already stated they do not intend to pass their tax cuts on to workers as salary increases. He also intends to increase health insurance and pension premiums by 3-5%. Combining these will mean Naoki Average will be at least 20% worse of. Sales tax should not be increased and corporations should be ordered to pass on their tax cuts as salary increases. This will stimulate spending and get the economy rolling again. He also wants to encourage international companies to invest in Japan, but a sales tax increase will make it to expensive to do so. Joining the TPP will help the economy, but he should increase import tax to make local products more appealing to consumers. You can't stimulate an economy if nobody has any money.

  • 1

    BodyBoardBabe

    Food, Medical, and Education should not be taxed. If you cannot figure out how to do that, ask us. It is quite simple. Potato chips are not food. Potatoes are. Cola is not food. 100% juice is. Duhhhhhhh

  • 1

    Jimizo

    Growing legions of temps in poorly-paid jobs unable to buy expensive goods or make long-term financial commitments, stagnating wages for most, rising prices and now a possible tax hike This incoherent mishmash of sound bytes and papering over cracks will see the worst off screwed even worse than those of us fortunate enough to make a living wage.

  • -8

    falseflagsteve

    People here are over reacting. This is not 30% it is 3% a paltry figure. There is also advanced warning of this so people can be prepared. Imagine if there was a war like WW2, how would people these days cope? I despair.

  • 5

    smithinjapan

    So where's the household wage increase we were "vowed" to go with all these hikes. You'll notice I didn't add a question mark. Instead of raising the consumption tax to pay off debt, how about stopping the billions of aid donated when the people in the north still have nothing? How about cutting the incredibly unnecessary public works projects? How about getting rid of the 'retired' amakudari workers? Nah, that would mean trouble for the elite instead of your regular Joe.

  • 6

    sillygirl

    @falseflagsteve - it is the increase of sales tax along with prices rising, utilities, rising, health insurance rising and the poor slobs, me included, are not seeing any benefit from the slashed corporate taxes. It really does mean a whole lot more than 3% and we just don't have the money to spend. I am not talking about luxury goods which I believe should be taxed at a higher rate.

  • 1

    fxgai

    You don't ask businesses to raise wages and expect it to happen (unless it is a communist, centrally planned state like North Korea). What you do is enact policies that result in improved business conditions, which raises demand for labour, and subsequently puts upwards pressure on wages.

    But Japan is stuck with inflexible labour laws that burden companies with essentially unemployed people. How can anyone seriously expect businesses to raise wages and at the same time force them to continue providing social welfare? Abe and his team need to find a more productive balance than what Japanese business is ladled with right now. We are still really waiting for details of this 3rd arrow. Were the details pushed back to Autumn?

    The Japanese voters and their mass media have to pull their heads in. There are no free lunches, least of all in Japan with it's horrid demographics. Spending cuts are a must but there is unfortunately no crisis mentality... until the crisis really gets bad. It's hard to predict when that will become obvious, but when you are spending a quarter of what you make each year paying back interest on your debts, even when interest rates are at rock bottom, it should be at the forefront of voters minds that Japan has a problem and there aren't any pain-free fixes.

    But it's also wrong to without salary increases one can't do anything. There are ways to generate income, besides one's primary salary. People who see this have quite probably been doing better since Abenomics started.

  • 1

    GW

    FFSteve

    FYI an increase of 3percentage points from 5 to 8% is..................60% increase in consumption tax, just sayin

  • -3

    fxgai

    Disillusioned,

    If the sales tax is increased by 3% it will mean a 5% increase at the check out.

    How does that figure? It may be only a 2.5% increase at the check out.

    corporations should be ordered to pass on their tax cuts as salary increases.

    Are there any examples where this sort of central planning type policy has been a success?

    Jimizo

    fortunate enough to make a living wage.

    What is a "living wage"? Is there a difference between that and the commonly known minimum wage?

    sillygirl,

    the poor slobs, me included, are not seeing any benefit from the slashed corporate taxes.

    Possibly because they haven't been slashed yet :)

    Look, I understand that people want to have different rates of tax on different types of products, but that just becomes an administrative nightmare. Administrative nightmares are expensive, and the goal is to increase revenues, not increase expenses. Who here seriously thinks the Japanese bureaucracy would manage to get it right? IMO the govt is on the right path going for an across the board, easy to implement, flat tax rate increase. In reality, the "poor" people of Japan are relatively wealthy compared with the global average, but there's always the redistributive elements of the taxation system to give handouts to the bottom wrung of the ladder.

  • 2

    gogogo

    falseflagsteve: I'm happy you can afford it, I certainly can't, means less every month combined that with the 10% power bill increase :(

  • -2

    falseflagsteve

    @GW,

    Yeah 60% of consumption tax is not 60% of an item's price. There are plenty of ways to economise and also to make easy money in Japan. In this modern world we all need to be ready at anytime for changes. security of past days sich as lifelong employment and guaranteed pensions are long gone for many. In past times we were tougher, more independent and resilient. We need to get back to those values and lifestyle so we can handle the crap being thrown at us by the big boys.

  • 0

    Mike45

    "the DJP had the right idea with cutting the bureaucracy but couldn't follow through"

    Agreed but Noda and the others were lethargic and too leftist for most of Japan; Abe nationalism and Ishiharas mischief took advantage of the situation and at least got things rolling. I think Noda and Tateyama were right to try and engage China instead of what we have today, but nationalism gets peoples minds off Fukuhima and the recession.

    I think Abe is trying to open the country; he is trying with TPP, with the Corporate tax cuts, foriegn investment, Olympics etc. Somehow I think all the nationalism was just to get things started and used as a diversion. It seems he is now actually encouraging more foriengers and foriegn investment. He is facing the same special interest the left were facing. Im not an economist, so I dont understand why the retail tax increase at this moment; why not wait until inflation gets to the 2 % mark after wages are increased? How can domestic companies increase wages when their margins are cut by a 3% tax hike?

  • -3

    fxgai

    falseflagsteve,

    I like the cut of your jib.

    In this modern world we all need to be ready at anytime for changes.

    Oh, so true. Who wants to leave themselves solely at the mercy of policies of the democratically elected government of the day?

    In a democracy it only takes a little over half of the voters to decide something that could negatively effect you. It's up to individuals who value their freedom to take steps to diversify the risks that are thrown up at them.

    Those who don't see the value of that freedom just have to suck it up (and perhaps complain about it to others) when things don't go their way. But we sure live in a system where the odds are better than those that people face when born into some regime like North Korea or the like.

    There are plenty of ways to economise and also to make easy money in Japan.

    Yup. I don't know of easy money though, but there are certainly ways to make money. Diversifying one's income is really important for a lot of people living in developed nations these days. Hope is not a strategy, as they say.

    Mike45,

    Im not an economist, so I dont understand why the retail tax increase at this moment; why not wait until inflation gets to the 2 % mark after wages are increased? How can domestic companies increase wages when their margins are cut by a 3% tax hike?

    These are good points. It must be said that there are some contradictions in the Abenomics agenda (although tax hikes were already decided before Abe came back to power), a clear, comprehensive strategy to get Japan's debt back on a sustainable trajectory would not go amiss...

  • -1

    John Occupythemoon Daly

    I just hope the Yen can hold it's strength against the US dollar long enough that I can transfer what paltry money I have made here back home. I would love to keep living and working in Japan, but Abe (among other factors) is making it tough.

  • -1

    Stan Dingback

    My income is rising, yet I'm making cuts in my expeditures as it is. I'll be making more cuts and shopping in non-taxed environs more if Dishonest Abe pushes this braindead tax increase.

  • -1

    Tamarama

    Increasing the consumption tax in Japan is absolutely necessary, make no mistake about it.

    Even at 8%, it's around half of the world average. 5% is some of the lowest in the world. And it's not an issue of if, but more of when they decide to implement it, so you'd better get used to the idea. The only thing they are really worried about is whether it will stall the economic growth they are attempting to sustain - which is currently at nearly 4%. One of the great problems for Japan is the instability of the leadership, and that raising taxes in Japan is political suicide. But Abe may just have the popularity and stones to get it done.

    At the end of the day, you have to service your debt - and tax is one of the ways to do so. But this needs to be combined with other measures such as reducing wasteful spending, encouraging the central bank to be more aggressive and so on.

    Despite all of the naysayers here saying Abe is an idiot, Abe doesn't know what he is doing, the simple fact remains - Abenomics has started something in Japan. The economy is growing for the first time in Years, the Market is up 40%...things are happening. Increasing consumption tax is another part of this puzzle.

    That's why he is the Prime Minister of Japan.....and you aren't.

  • 1

    sangetsu03

    For comparison's sake, let's say I own a business which employs 10,000 people. I pay all of my workers a good wage, including medical care and a full pension. Many have company cars, have the latest equipment, and work in the best offices in town. But, business is not good at my company, I have been spending more than my company has been earning. At the moment, my company is bringing in $5 million-a-year in revenue, but my overhead is $8 million-a-year. At the moment, my company has debts of about $1 billion dollars. A large percentage of what my company earns goes to pay the interest on this debt, but never any to the principle, as my debts are accumulating more quickly my ability to repay them. The market for my goods is decreasing, and will continue to decrease at about 1% per year indefinitely. In order to improve my business, I decide to build some more new offices, hire more staff, and invest in new equipment. How long should my business be allowed to keep running?

    This is exactly how the government s being run.

  • 2

    BluesRee

    It's not how much the tax is, but how it is being used which is important. As it stands Japan is on a road to default as long as expenditure is so high. Wealth is being taken from the young and being redistributed to the old, and a tax burden imposed on future generations. There's no way out, either the old take a hit now or their grand kids end up shafted. Bitter medicine to be taken somewhere along the line.

  • 1

    Mike45

    @Tamarama,

    I dont think Abe is a genuis myself and I dont think he is working alone; I think he is just doing what nobody else would do in an extreme risk adverse japan. He also has had plenty of time to practice during his last term, and observe the failings of latter cabinets. I beleive Japanese are the masters of manipulation. I dont mean this in a good or bad way...it is what it is. It started with Ishihara and the senkakus to snap Japan out of the Fukushima apathy and win sympathy for the rightwing, then Abe and the nationalist win the election by a landslide, then talk of a constitution change that was immediately needed due to the mishief fabricated by Ishihara to deal with China. All of this works hand in hand with Abes economic reform. The Olympics was a lucky break. I am starting to see another more international side of Abe, however. Perhaps ishihara was just a tool, a means to an end, to get Japan restarted and Abe has created this all own his own. If Abe succeeds, then Ill eat my words and call him a genuis.

  • 0

    presto345

    Even at 8%, it's around half of the world average. 5% is some of the lowest in the world. And it's not an issue of if, but more of when they decide to implement it, so you'd better get used to the idea.

    Making comparisons with other nations is totally meaningless because what counts is the way taxes are spent, or rather: wasted. European nations with high VAT or whatever they're called in their respective countries for one thing do not have the enormous waste of tax money spent on [unnecessary] construction.

    An across the board increase is definitely wrong.

  • -2

    fxgai

    Why is an across the board rise wrong? Japan and New Zealand do it this way, and there are no arguments about pastries and what have you. Simple is usually better. If the 'poor' in Japan need help, raise their benefits.

  • -3

    JeanValJean

    presto345, well said.

  • 1

    nandakandamanda

    Raise consumption tax and the future is golden! Yeah, right... Europe takes 20%, so the economy must be brilliant there, by that line of thinking.

    3% in Japan was bad, 5% was very bad, and any increase above 5% is far worse.

    If you need to fiddle with something for a change, reduce consumption tax to 0% please.

  • 3

    iskysong

    >

    Abe, you have done very well since you took the helm so far with the weakening in yen.......

    but this sale tax hike will be the start of a "Policy all gone wrong!" ......

    This policy will drag you down if you decided to push the green button.

    There are many ways to reduce National debts.

    “If Japan failed to take action now, it would lose its trust with the world.” Taking action by increasing local sale tax is a NO NO, you want to win the world but gamble with your domestic sentiment? Sale tax affect the entire nations of your own type........Think carefully before you become "History" like Michael Jackson!

    Reduce wasteful govt spending, increase corporate tax, are examples to solving National debts, not by increasing sale tax affecting the struggling locals...... period!

  • 1

    NipponMarketBlog

    It is too early to raise the consumption tax, because the so-called 'recovery', i.e. the boost to GDP from government spending and QE, has not become anywhere near as self-sustained as required for the government to start raising taxes: One wonders why the focus is on taxes, and not on lowering spending....

    http://nipponmarketblog.wordpress.com/2013/08/09/overconfident-kuroda-urges-sales-tax-increase/

  • 0

    sfjp330

    Any improvement in J-government revenue from the tax increase in proportion to expenditures will not make much difference, where ageing society and public services are continuing to make larger deficit in the budget. There is no real progress on containing welfare spending, so even if you raise the sales tax, Japan's finances won't improve. Japan has twenty-five percent of the population that is already over 65, and the welfare is the biggest and fastest growing category of spending. The government has taken some aggressive steps, such as raising the full retirement age to 70 and pay greater fees to medical benefits. If you decide to retire in the 65, they should receive substantial reduced amount.

  • -1

    fxgai

    They aren't raising consumption because they think it'll make the economy so much better. They are doing it because Japan is totally mired in debt, and they can't put off paying it off forever, or Japan could indeed become like a handful of broke European nations.

    Wasteful govt spending should be reduced, of course. But that's easier said than done, and is eliminating such waste going to enable the debt mountain to be reduced?

    Show us the maths. What's are the concrete, alternative options to make inroads into reducing the debt mountain?

    Increasing corporate tax is only likely to drive even more business out of Japan, which would shrink the economy, reducing tax revenues, and make the problem worse. Japan needs more business to help resolve the problem, not less.

    Look, I'm not looking forward to paying more for stuff I consume either, but consumption tax is a burden shared by all, and why shouldn't all share the burden? The Japanese voters are rightfully the ones to share the burden, as a result of their choices come election time over the past 2 decades.

    Money doesn't grow on trees as they say. The BoJ may be creating money out of thin air at the moment, but they can only do so much before they precipitate a crisis of confidence in the currency. Japan's trade surplus is gone already, the current account surplus is likely to go next. Destroying the yen by money printing is not a long term solution.

    NipponMarketBlog,

    One wonders why the focus is on taxes, and not on lowering spending....

    It's a good point. Unfortunately it seems to me that politics in this country is not mature enough to be at the point where a political party in favour of such an approach has significant support. Maybe the time will come if Abe's reflationary attempts fizzle out. But with demographics as they are, one wonders how politicians campaigners to reduce pension payments could possibly get elected. (Maybe Abe's successor of the LDP leadership might have a show, as LDP seems to get most votes by default, irrespective of their policy platform...)

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