Abe defends sales tax increase

It's meant to pay for social welfare but it will just go to contractors and special projects.

“The economy will overcome the tax hike.”

I hope so, otherwise troubled waters are ahead.

What I've seen in the States when I visit, and I'm seeing here as well is hidden inflation. There might be a more technical word for, I'm not sure. Products are reduced in size and/or quality. I see this the most with cake and treat shops. There's a treat that we have with our weekend coffee that has some kind of caramel sauce poured on top of a round croissant, then topped with walnuts and sliced almonds. A few months ago they tried reducing this topping by half but not the price. People stopped buying them so they eventually went back to their old topping amounts. We've also seen a popular cake we like go from 8 slices to 10 slices, much smaller, same price. When my wife asked, the Mozart worker said the customers requested it.

I think we will see much more of this in the future so keep your eyes open.

Abe has imposed consumtion tax hike and he is defending it....becomes a news item?

yes, inflation has been rampant here for a long time. As FizzBit says, everything has been reduced in size and quality but the price itself doesn't change. They think we don't notice! This degrading doesn't show up in inflation statistics of course.

It is not only the sales tax increase, but I'm sure most of you noticed gasoline went up by 7 yen yesterday as the gov't introduced a new environment tax. As well as the tax on cigarettes(should be much higher IMO) and alcohol. They are really sticking it to the little guy this time. And as other have said, there has been hidden changes, as in packaging sizes, and increased charges for things that were just a little while ago free. And the best thing is, we get to go through this all again next March and April when the tax is to rise to 10%! Trust me is they get any money out of this and the economy doesn't tank, they will march ahead with the 10% tax as quickly as possible!

"Abe defends sales tax increase" which is a sure inflation of 3%.

I guess most of Japanese people are happy now that they got their inflation of 3%.

Sales tax increases basically transfer consumer savings to government expenditures. Lower productivity in long run. Government debt still ballooning. Population still aging and declining. Bad inflation increases. Wages remain stagnant. Government employ more people. No actual reforms from cultural barriers. Consumers purchasing power decreases. Japan is heading for bankruptcy of its government or Japanese heading for lower standard of living or both.

Much of this will be wasted on the increased military budge as well as pork barrel projects.

Let the consumer boycott begin.

Abe defends sales tax increase

But Mr Abe has plenty of money to spend ! The sales tax hike is not going to hurt him... In fact, it means MORE money in his pockets ! However, for the people (like me) who can't find any kind of stable work, it's a BIG blow and we've already started tightening our belts

Abeconomic damn 3% not a joke what about the small company how they can survive ?

at the moment my salary doesn't cover my family of four, and now a increase in tax consumption? What about an increase in consumer salary? or like they did back when, give some kind of bonus to consumers to allow them to feel appreciated! And as FightingViking says, people like US, can't find any kind of stable work.

Pension premiums should have gone up long ago if this was the shortfall. As Cricky said however, much of this money will be used for wasteful concrete and hole-digging jobs (as well as Olympic construction).

I hope people start to use "Abegeddon" if everything breaks now.

Abe pointed to spiraling health care and social welfare costs, which are straining the public purse in a rapidly aging society.

Utter nonsense. Abe's party has a long history of starting massive construction projects (with backhanders to contractors - often yakuza) and then stopping the project. There are dozens of dams, nuclear plants, etc, scattered around Japan, all half-finished and non-operational, that the tax payer has paid trillions of yen for and never seen a cent in return like lower electricity costs.

Liar! The rise is being offset by more borrowing for "stimulus" It is no way being used for social security spending in the future.

I watched NHK 9:00 News last night and they reported that the government is already considering raising the sales tax to 10% by next year October (although several economists have argued against it).

Australia 10%

Belgium 21%

Brazil 17%

Canada 5% (plus various state taxes pushing it up to 15%)

Denmark 25%

Finland 24%

Germany at least 7% (up to 15%)

Italy up to 22%

ROK 10%

Holland 21% (6% on essential goods)

New Zealand 15%

Seems like a lot of people above are complaining out of both sides of their mouths. Japan has always had very low taxes. People got used to it. Eight percent barely brings Japan into line with most other countries around the world.

Its undeniable that the cost of "social welfare" programs cost money. The more socialist the country is, the higher the tax rate. Somebody has to pay for all the sponges.

Don't get me wrong, I'd rather not pay more tax obviously, but 8% is no disaster.

@hidingout When people are paying ridiculous prices for essentials like fruit and veg and then get hit by a tax increase, of course people are going to be upset.

I'm betting fruit and veg prices are much more reasonable in the countries you listed, even with the higher taxes.

I'm betting fruit and veg prices are much more reasonable in the countries.

Ridiculous? Spare me. Fruit and veg is not breaking anyone's bank account. I bought a head of cauliflower the other day for like 300 yen and did feel kind of disgusted by the price. But I used it over two days and honestly is 150 yen for a serving of vegetables "ridiculous"?

I happened to ask my brother (who lives in one of the countries above) how much a head of cauliflower was where he lives. The price was virtually identical.

People complain about 8% tax yet the will flock to Starbucks to buy 500 yen specialty coffees. Now that's ridiculous.

@hidingout

Ridiculous? Spare me. Fruit and veg is not breaking anyone's bank account. I bought a head of cauliflower the other day for like 300 yen and did feel kind of disgusted by the price. But I used it over two days and honestly is 150 yen for a serving of vegetables "ridiculous"?

It is to me !

I happened to ask my brother (who lives in one of the countries above) how much a head of cauliflower was where he lives. The price was virtually identical.

First of all, if it was the same price including tax, it was obviously cheaper to start with... True, the tax in Denmark IS quite high, but the standard of living in general is MUCH higher than in Japan and there are so many "social benefits" that make up for the higher taxes.

People complain about 8% tax yet the will flock to Starbucks to buy 500 yen specialty coffees. Now that's ridiculous.

I've never been in there and have no intention of ever going there. I don't go into ANY kind of café or restaurant, I can't afford to.

Of course he has to defend the sales tax. He needs the money for militarizing the country; a result of his sabre rattling Japan's neighbours. The people paying for the folly of one man and his gang of thugs????

@ Viking

I understand there are people who are legitimately struggling. I'm truly sorry if that's the situation you find yourself in. That said, I find it difficult to believe that vegetables are too expensive for people here in Japan. I mentioned cauliflower because its one of the most expensive vegetables to buy in Japan. Carrots, potatoes, spinach and various Japanese greens are very cheap.

This is not to mention that the quality of produce is much higher in Japan than in my home country. When I buy a bag of potatoes in japan I don't need to throw half of them away because they are all soft on the inside. Carrots are firm, not rubbery. Never found worms in my broccoli. And I defy anyone to tell me that the apples in Japan are not vastly superior to those from their home country.

there are so many "social benefits" that make up for the higher taxes.

I'm not in favor of that, sorry.

Tax the hell out of people and print more money that's creates debt and have the people pay forever. Thanks Abe.

I am sure Abe's 3% will have no effect at the next elections

Abe pushes for his tax raise idea while not opting out on his yearly bonus checks. He talks about trying to balance the economy while giving away millions of yen to other countries. Abe is a total hypocrite!! He can never be trusted in what he says anyone. All of his talking and excuses for his foolish and stupid ideas are not doing anything at all to help anyone in Japan but only himself and his rich colleagues.

I'm in the same situation as tezbo2014. My current salary is not covering everything and I have spent almost all my savings to make ends meet. I'm from America where taxes are higher but food staples aren't taxed in most places. This tax raise I could agree with if fruits, veggies and rice, etc weren't taxed. Also many places its not just 3% it's rounded up: train fares, toll roads places where it's rounded up to 50 or 100! I use the highway to work 4 times a week or so yes it's gonna add up! Retired people like most of my neighborhood will feel every yen of it, 3% on one item isn't going to kill them but 3% on a months worth of food and supplies, gas, car insurance, kerosene and utilities will add up! 3% on electric, gas, water, sewer these things you can't go without :( I work for the Tokyo metropolitan govt as a teacher and I've never had an increase in my pay in 26.5 years. My hourly wage was cut by ¥1,500 an hour some years back and my hours reduced every year until three years ago. They cut hourly wage an offered transportation instead which was say -¥6,000 plus ¥1,100 for transportation but they tried to make it seem a better deal! Clearly they are mathematically challenged!

I agree about the hidden inflation which someone mentioned above. Cheese here in Japan use to have 10 slices per pack ages ago, then they went down to 8, and it's now 7 slices for approximately the same price. Oh I wish I had a Costco next door with those huge packages of cheese which you don't have to bother with the awful thin films!

Now Mr. Abe, what happened to the raise in salary? We haven't seen much yet but everything from income tax to prefectural tax, health insurance, gas, and now finally daily necessities have risen big time!

Tax the hell out of people and print more money that's creates debt and have the people pay forever. Thanks Abe.

his foolish and stupid ideas are not doing anything at all to help anyone in Japan but only himself and his rich colleagues.

Scary how little some people understand about economics.

Interesting that none of the JT socialists want to say anything about the fact that even after the 3% increase, Japan still has lower taxes than virtually any other first world country. Can't articulate anything about their stance, but very skilled at pushing that thumbs down button. lol.

Hiking taxes across such a wide swath of the economy is rather an inelegant way of raising revenue, it's 'capture all' principal can smother growth in the a blink of the eye. Sale taxes are the ultimate fiscal blunt instrument,, only helping politicians that want to 'grow' government. The 'standard rate' in the UK is an eye watering 20%.

Interesting that none of the JT socialists want to say anything about the fact that even after the 3% increase, Japan still has lower taxes than virtually any other first world country. Can't articulate anything about their stance, but very skilled at pushing that thumbs down button. lol.

To be fair you just can't compare Japan's financial situation with the other countries. Australian consumption tax may be high but the employment wages are typically higher than Japan with enough support for struggling families so are the European countries, Japan on the other hand is having enough trouble with population decline looming already.

Yes Abe san entire approach to corporate tax strategy and economic investment policy.. Example, could have included a basket of measures to rein in government spending by a minimum equal amount. Another, choosing the size, structure and timing of the new bond issuance issue, needs to be fully addressed, they cover some 40%+ of the state’s revenue. Corporate tax 35%, has a direct affect on wages.

" Seems like a lot of people above are complaining out of both sides of their mouths. Japan has always had very low taxes. People got used to it. Eight percent barely brings Japan into line with most other countries around the world."

@hidingout and others who support tax increases, the taxation levels in other countries( or on Uranus) are absolutely irrelevant. The only facts that are relevant are the effects the increase will have in Japan: increased poverty among the people, and increased wasteful government spending.

The taxes in other countries are generally not across the board, e.g. in the UK food, children's clothes, books and printed materials, medicines, sports activities, museum and cultural admissions, educational materials are exempted. A fairer system...

Still waiting for that third arrow/structural reforms. Is joining the TPP his only plan?

And what about outstanding government bonds they will total ¥750 trillion by the end of March 2015, that is the equivalent of 15 year + of fiscal 2014 tax revenue.

One can make stats do somersaults.

It depends on who's doing the counting and what you want them to say.

At the end of the day how do you feel? Do have more to spend ? Are you richer or poorer?

Every person on planet earth is asking the same question of there government?

I called this over a year ago. The only way out for this stupid Abenomics is tax increase that will drive up further inflation without reciprocity from increasing salary levied by its corporate and conglomerates.

Most of the real Japanese wealth are being siphoning offshore with the depreciating yen and companies had not hire enough or provided enough raise to compensate for the stagnant growth rate coupled with a 3-5% increase in inflation. More on non-durable goods.

Now, its happening. We in the financial world had seen this game played out over and over in various parts of the world. Japan will get it worse than others due to its lack of new bloods in the work force with substantial disputes with two of its biggest traders.

I see a lot of people here getting all excited and being quick to condemn others but honestly speaking, if Abe and his likes would just shut the hell up and stop digging up old wounds or simply ignore these topics, Japan would've been in a much better shape. At the very least, it would've been able to penetrate China'a financial market where that talk is dead for eternity after all these unnecessary confrontations. You guys could've made billions. Now, the Europeans will get that chance, especially the Germans and French.

Japan is in this pathetic economic state all because of its own lack of vision and arrogance. And its unwillingness to consolidate and vastly dependent on its dwindling domestic consumers market is simply stupendous.

Can your average Takeshi really complain if they don't like Abe's policies? Statistics would suggest they shouldn't as there's a reasonable chance they didn't turn out to vote. 11 years in this country and I wish I could vote so I could at least say I didn't vote for him and his cronies.

I agree that Japan needs more revenue to spend on health and welfare, but at least only tax non-essential items. It's not like we can be selective about some of our purchases. We have to buy food. An 3% increase on everything is really going to hurt low income earners.

At the end of the day guys like Abe here are members of the same ruling elite that have ruled Japan for centuries. These people don't care in the slightest about the "small folk." 3% sales tax increase is nothing for the likes of Abe and co. As others have said, the extra revenue will most probably line the pockets of friends and supporters in the form of pork-barrel projects.

Ranting, but just to demonstrate how little this guy ( Abe ) cares. He lives just up the street from me. There is always a crazy police presence in our neighborhood because of this. Our building manager was bad-mouthing him the other day because again, they closed all the roads around us for a few hours because he was going to be moving in that period. If he just stayed at the official prime minister's residence, the country could save a bit of money on his bloated security needs. Less wastefulness like this and perhaps we wouldn't need a tax hike?

Just wondering if there has been any alternative strategies put forward by opposition parties? I was wondering also about ¥100 shops, are these wonderful emporiums absorbing the rise?

" I agree that Japan needs more revenue to spend on health and welfare…"

Nope. That's where you just went out to lunch. Economic fallacy.

It seems hidingout is living in the parallel a universe/world; however, his comments, from time to time, are quite entertaining though . :)

In terms of new tax rate, I am not completely against 3% of hike given current Japan’s financial situations (budgetary fiscal deficits and huge national debts amassed from years’ spending sprees). It's a bitter medicine for Japan to put its financial house in order per se.

Nevertheless, I do believe that raw food including farm products, water, juice, and other household essentials should be exempted from taxation so that common people don’t have to share the disproportional size of burdens comparing with the well-heeled. For expats like us, 3% consumption tax hike might not make much a difference, but to those elder pensioners as well as people with low income, this indiscriminate tax hike without paying attention to disadvantaged groups in the society appears unfair.

In the US, percent of sales taxes in each state and city varies from 0 % to 9.75%, but many food items and produce are commonly exempted. Such taxation policy is designed to help low income people to alleviate the load for a reason mentioned above.

If you cut down on the waste, pork-barreling, and amakudaris, then there's no need for a tax hike.

I'm guessing that hidingout is a 20 something healthy adult with no dependents. Pretty easy to swallow a tax raise when you are only fending for yourself. As others has posted, comparing Japan's sales tax with other countries is nonsense. There are a lot of direct taxes (health insurance premiums, pension, income tax, car tax, etc) that are much higher here than in several of the countries posted in his/her earlier list.

Abe has increased the sales tax but lowered the corporate tax, even though 66% of the corporations in Japan don't pay a single yen in tax. We all know what this is all about. Unlimited industrial expansion. And letting the people pay for the burden. And the Japanese are fooled, yet again, it seems, by appearing to "need" the tax hike, or the economy will collapse, which is far from the truth.

The tax increase makes ZERO sense when you have to spend trillions to counter any adverse effects it might have, and you are at the same time ensuring the future of this nation will depend on further tax hikes and bailouts. Abe has destroyed this nation's future, and continues to do so, and is no on the defensive as a result. You want to free up more money for social services? start by cutting all the bridges to nowhere.

" If you cut down on the waste, pork-barreling, and amakudaris, then there's no need for a tax hike."

Totally agree!

As Maggie Thatcher said, "The trouble with socialism is that sooner or later you run out of other people's money."

The books are bleeding profusely!

Some of the few companies that have benefited already are the ones who print signs, noticeboards and labels, as trains, subways, ferries, buses, post offices, public offices, tourist spots, in fact anywhere that charges people update their signs with the new prices. They'll get more business again when it goes up from 8~10%.

It seems hidingout is living in the parallel a universe/world; however, his comments, from time to time, are quite entertaining though . :)

Glad to be of assistance in brightening up your day. I bet you liked the one about aliens landing on your roof.

I'm guessing that hidingout is a 20 something healthy adult with no dependents.

Well I've lived in Japan for more than twenty years, so you do the math. And yes, knock on wood, I do have my health. As for dependents, that's none of your business. I would say that as a general rule people with dependents chose to have dependents and don't get to cry "poor me" if the dependents turn out to cost more than expected. They also don't get to expect other people to be taxed through the nose to pay for their dependents.

Look, people can give me the minus all day long on this topic and it won't change the fact that Japan's taxes are still lower than almost any other first world nation. Amazing that some people are so bent on complaining that they won't recognize that simple truth. Fifteen minuses for a post that simply lists the tax rates in other developed countries - many that are double, and some even triple, the 8% we are all so worked up about.

If anyone feels the tax burden is too great in Japan they are free to return to their home country where the tax rate is almost certainly higher. Or stay, and keep complaining when it goes up to 10% in a few years time.

Hiking taxes across such a wide swath of the economy is rather an inelegant way of raising revenue, it's 'capture all' principal can smother growth in the a blink of the eye.

Inelegant? You must be kidding. The problem with most of the tax code in any country is that it tries to be altogether too elegant, and ends up a complicated garble that nobody can understand. Simple taxes are better, and fairer. A sales tax is arguably the fairest tax of all because it only applies to people who wish to spend money. Spend more, pay more. So it requires the rich to pay more without punishing them for being successful by fleecing them at an arbitrarily higher rate than everyone else. Buy a Porsche and pay a hell of a lot more tax than someone buying a Vitz. Or buy a bicycle and pay very little tax. Or ride the subway and pay no tax. Very fair, and gives people choices. I agree that it would be nice if certain staples were exempted from the sales tax, but that's not the way Japan decided to go. What can you do? I stand by my assertion that nobody is legitimately suffering because the price of a bag of carrots went up by 10 yen.

No one's talking about a single bag of carrots costing 10¥ more, are they? It all adds up. If you spend 5000¥/day (which isn't much for a family of 4) then we are talking about an increase of nearly 60,000¥/year. That isn't chump change for people who are just getting by. Obviously, people who are thinking about buying a Porsche don't care about an increase like that. However, those deciding between a Vitz or a bicycle definitely do care about an increase like that!

Also, where are you getting free subway rides? There is definitely an increase there as well.

BuBuBuAPR. 05, 2014 - 11:03AM JST Also, where are you getting free subway rides? There is definitely an increase there as well.

I don't know maybe this guy has a chauffeur. Rich enough that 10% tax raise or more wouldn't bother him. Pretty sure he'd be a type of person to say, let them eat cake and indulge in his naivety.

The tax increases try to keep pace with the spending but never seems to catch up. It started out at 3%, soon it will be 10% , and not too long after that it will go up again.

I think the minuses on that post listing the tax rates are because it intents to deceive people. There are important footnotes here to consider. There are already many hidden taxes, tariffs and price distortions etc. in Japan. Also thse other countries usually don't tax food or tax food at a lower rate.

I think the minuses on that post listing the tax rates are because it intents (sic) to deceive people.

No it doesn't. Its a straightforward list. If you buy a Playstation, or a new coat, or a bunch of flowers for your girlfriend you have to pay the sales tax. It is significant that there are many (most) countries with double the tax rate of Japan on that list. Double. That's a big difference.

There are already many hidden taxes, tariffs and price distortions etc. in Japan.

Like what? The only thing that I see as different is the extra city taxes in Japan. In my home country generally only property holders pay a separate tax to the city. In Japan everyone has to pay. Unless you own property, its a piddly amount anyway considering the safe streets, clean parks and convenient transportation provided by the cities of Japan. Beyond that, what "hidden" taxes and tariffs are you talking about?

Also thse other countries usually don't tax food or tax food at a lower rate.

Let me ask you, what percentage of your income is spent on buying unprepared food from a grocer? People making a big deal about the lack of exemptions on food are acting like food is their biggest monthly expenditure. Keep in mind that there are no exemptions for dining out in any country that I'm aware of. Yes, an exemption on unprepared food items would be nice, I agree. But I know that I'd rather pay 8% on everything including grocery store purchases, than live in say the UK and pay twenty percent on everything except for unprepared food. Its a no brainer that the 8% across the board is going to be less money over the course of the year.

These are just budgeting facts, no intent to mislead anyone. Some people seem to be arguing that they aren't getting their money's worth in Japan because Japan is not a socialist country, and that's a different conversation altogether.

Go bruins!

Let me ask you, what percentage of your income is spent on buying unprepared food from a grocer? People making a big deal about the lack of exemptions on food are acting like food is their biggest monthly expenditure.

According to the government of Japan, food is the biggest monthly household expenditure. Don't believe me? Here is the link: http://www.stat.go.jp/english/data/kakei/156.htm

Have you got any more amazing budgeting 'facts'?

That clearly includes food items already prepared. And those don't qualify for any exemptions no matter where you live.

To reiterate, taxes in other jurisdictions DO NOT MATTER. Just because Venusians are content to pay x% tax on their tribbles doesn't have any bearing in Japan.

That clearly includes food items already prepared. And those don't qualify for any exemptions no matter where you live.

It absolutely does not indicate that this is already prepared food.

bububu, the graph in the link you provided clearly says "housing" is excluded. That is obviously the biggest expenditure.

OK this is what I would have done differently (to be positive):

1) Exempted food, medicine and goods for babies from this tax. Books would be taxed at no more than 5%. 2) Raised cigarette taxes so that cigarettes are at least ¥700/ pack (still cheap by G7 standards). 3) Raised land taxes on plots of land which are undeveloped/not used for agriculture but in which the owners are speculating for big gains. 4) Delayed nat'l pension payouts by 2 years (phased in over about 10 years). 5) Cut government waste, and wasteful construction projects. 6) Hired someone similar to Peter Uberroth as chairman of the Japan Olympic committee and keep this expenditure out of the red. Many of the facilities don't need to be torn down and built up from scratch. 7) Used some government money (maybe ¥1 billion) over the next five years to subsidize research in alternate energy and battery efficiency so that Japan can be a world leader in these high multiplier effect investments).

Go ahead and thumb me down, but at least I have a better plan. How about you?

bububu, the graph in the link you provided clearly says "housing" is excluded. That is obviously the biggest expenditure.

Wrong. There are two figures presented. The second one with double ** is the one excluding housing. The first figure clearly shows that housing is included in the monthly consumption expenditures.

So according to the site, people spend just 16,000 yen for housing? That doesn't even cover my month kanrihi and shuzentsumitatekin for my condo. For people who have bought a house or condo, the average monthly loan payments are around 120,000 yen. For non-owners, they would have to pay rent, which as you know can be quite high in this country.

http://buy-athome.jp/loancolumn/lc_20130530

So according to the site, people spend just 16,000 yen for housing?

This is what happens when you use averages. Obviously there is no way people are paying 16,000 yen for housing.

When you rent, you pay a fixed sum every month. That's expenditure. Let's say A pays 50,000 yen a month rent on his little one-room flat.

When you take out a housing loan, the value of the property is offset against the loan; your monthly mortgage repayments count as a transfer of assets, not an expenditure. Let's say B repays 150,000 yen on the loan on his detached suburban.

In sensible terms, the average amount spent on housing by A and B is (50,000 plus 150,000)/2=100,000 yen.

In accounting terms, since B is supposedly just moving his assets around and not actually incurring an expense, the average amount spent on housing by A and B is (50,000 plus 0)/2=25,000 yen.

The larger the proportion of home-buyers in the equation, the lower the average amount supposedly spent on housing.

The same sleight of hand works with education expenses; people with no kids will have 0 education expenses, while a family with a couple of kids in school/uni are definitely not managing on the laughable 10,000 yen a month figure given in BuBuBu's link.

The figures are less than meaningless, they are statistics.

Thanks Cleo, you said it much more elegantly than I could/would have. I'm glad someone understands how to read statistical information like this.