Ex-PM Noda says failure to raise sales tax would pose big risk

No wonder things are in a mess with this kind of flawed "logic."

The economy is screwed. Goods in shops are more expensive because of the last tax hike and salaries have stayed the same. That's the message that's going out.

Yet another tax hike would only create a wider gap between those who have money and those who don't.

And in any case, it is not needed. There are plenty of ways the government could save the amount the tax hike would provide.

Governments of course think themselves necessary. If they didn't scrape a higher percentage off the top of the economy things might stagflate. People not supposed to sit on their savings. They're supposed to move cash around so govt can get a cut.

Either Noda wants to join LDP or wants to misguide it.

Failure to lower spending is the biggest risk. Can someone explain why it is that the Japanese response to crushing levels of debt is is even higher levels of spending? Despite the fact that 26% of all revenue collected must now be paid to service the national debt, why does the government continue to pass ever larger budgets?

The funniest thing is that government spending continues to grow at a healthy pace, while the population and economy continue to shrink. Exactly what is the government try to accomplish?

The funniest thing is that government spending continues to grow at a healthy pace, while the population and economy continue to shrink. Exactly what is the government try to accomplish?

As a significant chunk of the next round of stimulus spending is going to be on public works, I think it's safe to assume the LDP is playing its usual game of shoring up its rural support base ahead of the next election. Staying in power is clearly more important to them than actually trying to do anything useful.

"would have minimal impact given that less than one-third of all companies pay taxes." some people would say that this loop hole needs to be closed, large companies don't pay tax, well they should! so 2/3of them don't pay tax...HELLO! Iam no finical expert but if these companies were targeted and made to pay tax, the country would gain millions if not billions in taxes for the government.

There are plenty of ways the government could save the amount the tax hike would provide.

Like a capital gains tax hike on the dosh made through the early phase of Abenomics? why would the patricians force that on themselves and their just as rich friends?

I agree with Bertie. We need a raise in the consumption tax to 10% like we need a hole in the head.

the decision will be a tough one, given the risk that a hike might derail the recovery

Ummmm...what recovery? Wages and savings are down, taxes and prices are up

while postponement could roil financial markets worried about Japan’s public debt.

Oh..I see, we don't want so scare the (booming) Nikkei market. Well if the stock market is booming along what's to worry about? Why not just cut some ridiculous spending starting on ceremonial politicians who do little other than attend ceremonies and give speeches? My tiny rural city has 30 council members who rake in 7 million per year.

Noda is a flipping idiot. Really just, No-duh! He could lose twenty kilos of useless flesh with a guillotine. The clear evidence of the idiocity of tax increases since the first implementation indicate the disastrous results of each moronic government action. Another couple decades of stagflation anyone?

Noda has it wrong! Failure to ensure companies pass on their tax cuts as salary increases to compensate for the sales tax hike poses a HUGE risk! These Japanese politicians are just thieves! The whole point of the sales tax hike is to increase revenue for the government to pay of their huge national debt - money they owe the people - However, they are just taking money from the people to pay back the money they borrowed from the people! Yeah, it sounds really stupid, but that is what they are doing! The success of the sales tax hike relies on increased spending, but they have done nothing to promote spending. Japanese economists still believe that, 2+2=3 and their blind ambiguity just proves it! They are just playing '52 pick up'!

What is likely actually happen, if things continue on this course, is that commercial real estate values will drop. The profits of businesses (restaurants, etc.) will be squeezed by the sales tax. When they renegotiate the rents from the owner, they will need a rent cut to afford to stay. This will affect property values in the end.

Everyone, listen up what Noda has to say. He is absolutely correct.

No, he is not a flipping idiot. He has been very consistent since his first day of PM. He is the only one who understands the failing LDP fiscal budget policy that has been out of control for the past 5 decades..

Do you want to keep Japanese National Healthcare and National Nenkin? You have a few choice if you want to keep them. And hope you know what to do. Some idiots do not see a big picture, I am very sorry to say.

Need more tax revenue? Raise the tax on cigarettes and shoot down two birds with one stone. More money collected on an optional BAD habit and reduce the number of smokers in time with the higher costs.

Japan needs to rethink the sales tax strategy - having a "blanket tax" that is the same for everything just hurts people at the bottom.

There is no need to increase tax on things like food and diapers - just aim it at luxury goods.

There is no need to increase tax on things like food and diapers - just aim it at luxury goods.

Right on!

All staples, medical ( drugs, hospital, long term care, health care) expenses should be TOTALLY exempt from sales tax. This is a solid economic ideology helping average Joe. The gap between the Rich and he Poor in Japan is getting bigger because a correct policy has not been properly implemented. As you know the middle income average Joe is disappearing in Japan.

globalwatcher: Everyone, listen up what Noda has to say. He is absolutely correct.

A better idea would be to publish layoff and unemployment statistics for Japanese government employees alongside those for the public at large. If it's like the USA, not much pain in the government sector, no matter what's going on the private sector.

Saying that the government HAS to raise a SALES PERCENT tax is admitting the government's failure. A percentage tax is self-adjusting vs the economy!

It should be the government's responsibility to adjust its spending downwards rather than its sales tax levies upwards. Even in a country where party in power's place is so volatile, I'd guess that's not the case. Because it still doesn't have to answer much to the populace once the election's done.

Government LOVES trickle-down economics, because remember, the first part of the trickle, which is actually a torrent, passes through their hands first.

@global, you're correct that Noda isn't a flipping idiot; he's a flipping lying, thieving socialist crook! He's an economic moron, to boot. The tax will further damage the stagflating economy. The eevidence is all-too apparent for anyone with even a dozen functioning brain cells to recognize. Socialism: The Road to Serfdom.

John GaltAug. 24, 2014 - 07:23AM JST

@global, you're correct that Noda isn't a flipping idiot; he's a flipping lying, thieving socialist crook! He's an economic moron, to boot. The tax will further damage the stagflating economy. The eevidence is all-too apparent for anyone with even a dozen functioning brain cells to recognize. Socialism: The Road to Serfdom.

For some reason, your posts often do not include solutions. Please include your conclusions or solutions at end of your post, so it will be more objective. Thanks.

turbotsatAug. 24, 2014 - 07:12AM JST

A better idea would be to publish layoff and unemployment statistics for Japanese government employees alongside those for the public at large. If it's like the USA, not much pain in the government sector, no matter what's going on the private sector.

I appreciate your feedback and I fully agree with you. The Public sector employment needs to be cut. The government has to be smaller and more efficient. It is a pleasure to read a post like yours that is backed by economic thoughts. Thanks.

@globalwatcher :)

"For some reason, your posts often do not include solutions. Please include your conclusions or solutions at end of your post, so it will be more objective. Thanks." Solution? That should be obvious. But to state it plainly, end collectivist/socialist actions by the self-serving political rubes.

Noda follows the typical socialist agenda, and the end of socialism is the economic collapse that is at the doorstep.

No, you can not have your cake, and eat it, too.

John GaltAug. 24, 2014 - 02:25PM JST

Noda follows the typical socialist agenda, and the end of socialism is the economic collapse that is at the doorstep.

No, you can not have your cake, and eat it, too.

John, please name any country that is run by PURE CAPITALISM?

This is where you and bass are having troubles with.. Do you drive on Interstate freeway in US? Did you go to public schools? Do you fly in/out of US international airports? Have you received any Unemployment Checks? Where do you get utilities (water, gas, electric) from? Do you have a police, sheriff run by private company?

I am just throwing some here listed above, so that you can come up with the answer.

How are we supporting the social infrastructures? Are they run by private company? If not, who pays for them?

"Noda follows the typical socialist agenda,"

You've outdone yourself with that one, John Galt. Socialism is state ownership of enterprise. Can you cite any examples of serious and sweeping efforts by the state in taking ownership of private corporations in Japan right now? I can't.

Japan's enterprises are thoroughly privatized, from the trains to the nuke plants, from the massive corporations to the tiny neighborhood workshops making tatami mats. There's hardly any socialism here.

Global, by your logic, since there's no pure capitalism, then all semblance of capitalism should be abandoned and go whole hog into socialism.

As for the infrastructure to which you refer, do you truly believe they are operated even marginally efficiently? You're only looking at the seen, not imagining the unseen which could be provided more efficiently by private enterprise in competition rather than by the current forced system. Look at the boondoggle of Amtrak! Every service, including roads and highways would be better provided by private industry.

JeffLee, the concept of socialism, on the one hand, means the ideals of social justice, equality, as Marx would have it to mean, and on the other hand, it is the means to accomplish those ends, meaning the abolition of private enterprise, of private ownership of the means of production, and the creation of a system of "planned economy" in which the entrepreneur working for profit is replaced by a central planning body.

Capitalism in Japan is surviving IN SPITE of the government strong-arming, though with the government heavily manipulating the currency, industry is getting squeezed. It hasn't devolved into Fascism yet, but the government aims to force corporate actions are steps in that direction.

JR and JP may have been "privatised" but they are as dependent on government as Amtrak. Let's not forget JA dependency on government largesse(subsidies). Indirect control of production.

Plenty of Socialism here.

John GaltAug. 24, 2014 - 10:24PM JST

Global, by your logic, since there's no pure capitalism, then all semblance of capitalism should be abandoned and go whole hog into socialism.

No, it is from Economic #101..

John, each of the world economies can be viewed as operating somewhere on a spectrum between Market Capitalism and Command Socialism.

In the Market Capitalism economy, the resources are usually owned by private individuals who have the power to make decisions about their use.

In the command socialist economy, the government is a primary owner of capital and natural resources and has power to allocate the use of factors of production.

Between these categories lie Mixed Economies that combine elements of Market Capitalism and Socialism that include UK, USA, Japan, Canada, Australia, Europe even China.

No economies represent a pure case of either market systems. We evaluate the extent of government ownership of capital and natural resources and the degree to which government is involved in decisions about the factors of production.

Lots of people complaining about the sales tax hike, but little to suggest many are familiar with the dynamics of Japan's spending.

The sales tax hikes were expected to bring in 5 ot 10 trillion yen (I forget which, it's a fraction of the deficit in either case).

So most of you appear to think, the government should cut an equivalent amount of the money, but no one appears to have actually looked at the budget and figured out which area they are going to cut 5 to 10 trillion from (and that would still not be enough to fix the budget deficit anyway).

Japan's expenditures are projected to increase primarily because of the aging population and the extra pensions and health care that needs to be paid out.

Personally I think these areas should be reformed, because the spending is unsustainable. But I'm extremely doubtful that you can reform those areas well enough to achieve a halving of government spending, which is what is required to fix the budget deficit (40-45 trillion), and even the more modest sales tax hike revenue equivalent of 5 or 10 trillion out is not easy.

There is a lot of government waste, we all see it, but what are the numbers?

Personally I think these areas should be reformed, because the spending is unsustainable. But I'm extremely doubtful that you can reform those areas well enough to achieve a halving of government spending, which is what is required to fix the budget deficit (40-45 trillion), and even the more modest sales tax hike revenue equivalent of 5 or 10 trillion out is not easy.

Too many unproductive bureaucrats and politicians are on government payrolls that need to be cut first. The government has to be much smaller and efficient.

First Japan can stop giving away money to other countries.

Maybe they do need to be cut first, but even with the DPJ and now LDP back in power, nothing much has happened in that space despite a lot of talk. Sad to say but it'll probably take an IMF program to get anything like that done in this country.

Sad to say but it'll probably take an IMF program to get anything like that done in this country.

No. You do not want to give up your financial sovereignty. In a brink of your eyes, the IMF will tell you what to do. The bond yield will spike up to 8 to 10% as Japan seen as risky investment country. That's what happened to Spain, Italy in EU financial crisis. Remember that?

globalwatcher,

You do not want to give up your financial sovereignty. In a brink of your eyes, the IMF will tell you what to do.

Not sure if you misunderstood my comment, but that's exactly why there's a problem with the government unsustainably racking up loads and loads of debt. It's not like the IMF just turns up one day, uninvited. The country in question has already screwed up on it's own in some way or another, and that's where the government's shoddy finances appear to be leading this country.

My comment is only to suggest that Japan is unlikely to be able to make the adjustments through some kind of democratic process by itself. More likely is that the problems are procrastinated upon until the negative consequences become obvious and IMF sends in some black ships to help impress upon the vested bureaucratic interests the need for serious changes to be made. And there you finally get those first cuts you mentioned.

".... the spending is unsustainable."

Yes, because sometime soon, Japan won't be able to count on its loyal institutions and households to buy its bonds, right? Oh, hang on, that happened already.

Yikes, time to find a new narrative. Whatever you do, don't left the facts and real events get in the way of your tired ideology, and if your predictions are consistently wrong (they are), so what? It's the narrative that counts.

Yes, if wages pick up, we may have a recovery to some degree (I wonder though). If not, there will be an effect on businesses, and something will have to give. Commercial property rents will decline for one. Tenant businesses will not be able to pay as much rent or even go under. Something has to give.

JeffLee, thanks, but I had already noted that you believe that it is sustainable for the government to rack up loads and loads up debt without any unintended side-effects, despite what the IMF, OECD, BOJ Kuroda, and here ex-PM Noda might say about it. So no need to remind me.

fxgaiAug. 25, 2014 - 01:57PM JST

My comment is only to suggest that Japan is unlikely to be able to make the adjustments through some kind of democratic process by itself. More likely is that the problems are procrastinated upon until the negative consequences become obvious and IMF sends in some black ships to help impress upon the vested bureaucratic interests the need for serious changes to be made. And there you finally get those first cuts you mentioned.

I think I am getting what you are saying here.

The problem of Japan is a lack of good leadership who can make a bold long term decision. You are churning too many PMs in the past 30 years. By the way, Mr. Masaaki Shirakawa has already predicted that a 2% of inflation is unattainable. This is a big blow who are still in denial.

That's right, leadership appears to be completely ineffective. Completely.

In the Japanese news today it's reported that budget requests from various ministries will exceed 100 trillion yen, for the first time ever. Despite the government's truly horrid fiscal situation. No doubt the Ministry of Finance will reject some of the requests, but still it's a disturbing trend that we have bureaucrats asking for more money to flush down the toilet each year. They should be mandated to decrease their budget requests each year, rather produce record spending requests... It's comical.

26 trillion yen is needed just for servicing the quadrillion yen of debts already accumulated, eating up half of tax revenues just like that. Then the record 31.6 trillion requested for social security programs would eat up the remainder of tax revenues (and then some). That's before the government even thinks about how to pay for all it's core responsibilities, let alone paying down some of the burdensome debt.

Elsewhere I read that the majority of Japanese are against a sales tax hike next year. I can understand that. But if the public wants to maintain a low tax burden, rationally they should expect the government to provide accordingly low services and social security. But as we see from endless budget deficits and record spending requests, the message hasn't reached the bureaucrats and Abe's team appear to be doing nothing about it.