Latest news with #consumptiontax
Free Malaysia Today
2 days ago
- Business
- Free Malaysia Today
Japan's ruling coalition partner to propose sales tax cut on food
A proposal to cut the tax rate from Komeito is expected to add pressure on Prime Minister Shigeru Ishiba to offer fiscal support to voters ahead of the upper house poll. (AP pic) TOKYO : Japan's junior ruling coalition partner, Komeito, will propose cutting the consumption tax rate for food items to 5% from 8% in a campaign pledge for the upper house election slated in July, the Yomiuri newspaper reported today. The campaign pledge, to be announced on Friday, will also include a proposal to offer cash payouts to cushion the blow to households from rising living costs, the paper said. A Komeito official confirmed the report, telling Reuters the tax cut idea will be among proposals in the campaign pledge due on Friday. The official spoke on condition of anonymity as he was not authorised to speak publicly. The proposed stimulus plan will be funded by an expected increase in tax revenues instead of additional debt issuance, according to the draft obtained by Yomiuri. Japan applies an 8% consumption tax rate for food and 10% for other items, with the proceeds mostly used to fund social welfare costs for a rapidly ageing economy. A proposal to cut the tax rate from Komeito, which is a junior coalition partner of the Liberal Democratic Party (LDP), would add pressure on Prime Minister Shigeru Ishiba to offer more fiscal support to voters ahead of the upper house poll. Ishiba and senior LDP officials so far have pushed back against calls from opposition parties to cut the consumption tax rate, arguing that doing so would worsen Japan's already tattered finances. Concern over Japan's huge public debt, which will become more expensive to finance as the Bank of Japan eyes further interest rate hikes, has been among factors that led to a surge in super-long government bond yields last month.
CNA
21-05-2025
- Business
- CNA
Commentary: Don't reopen the ‘demon gate' debate in Japan
TOKYO: Japan is facing a changing world of tariffs, artificial intelligence, and a potentially existential threat to its number one export. Yet its approaching election seems set to be dominated by a rehash of a decades-old debate. Consumption tax, first introduced in 1989 and raised over the years to its current maximum rate of 10 per cent, is shaping up to be the major theme of July's upper house election – a poll that will determine the fate of embattled Prime Minister Shigeru Ishiba and his minority government. With the public unhappy with persistent inflation, most recently in the form of a record surge in rice prices, Ishiba's rivals are lining up with spurious proposals to cut the sales tax or eliminate it entirely. He has pushed back, arguing that Japan's fiscal situation puts it in no position to reduce revenues. Japan's 'fiscal situation is undoubtedly extremely poor, worse than Greece's,' he told parliament on Monday. While the comparison is unwise, and helped to push up bond yields, it's true that the country is in no position to be cutting taxes. Calls to do so should be ignored – Japan doesn't have time to relitigate this staid discussion. DEMON'S GATE Arguments over the levy are so persistent that it's long been described in media coverage as kimon, a phrase that literally translates as a 'demon's gate' – from the ancient superstition that entrances facing northeast are unlucky as they allow evil spirits to enter – and refers in this context to a sticky problem or potential landmine. It has led to the collapse of governments and been blamed for triggering recessions. The issue overshadowed almost the entirety of Shinzo Abe's record-breaking premiership; and it so divided the now-defunct Democratic Party of Japan that opposition to the ruling party remains fragmented to this day, helping Ishiba's Liberal Democratic Party stay in power despite widespread public dissatisfaction. A recent survey found that more than 70 per cent of respondents want the tax to be scrapped or reduced. Ishiba's decision to rule out a cut has given opposition politicians a chance to focus on the issue even more, with proposals to temporarily slash the levy on food to zero or reduce the entire tax to 5 per cent until the economy improves. Ishiba's internal rival Sanae Takaichi, who tops polls of who should be the next premier, has broken ranks, backing the idea of imposing less on food. Ishiba bears responsibility for reopening the demon's gate, however: As US tariffs roiled markets earlier this year, reports said the government was considering the measure. AN IRRESPONSIBLE AND UNSERIOUS DEBATE Of course, Japan is far from the only place where sales tax or its equivalents are repeatedly discussed. Singapore's move to raise its goods and services tax has been criticised for lifting inflation at a time when citizens were already feeling the pinch. Vietnam cut its value-added rate temporarily last year, which it may extend. And President Donald Trump has criticised the VAT levied by many countries as a non-tariff barrier that hurts US exports. But in Tokyo, the debate is both irresponsible and deeply unserious. Opposition leader Yoshihiko Noda is making a temporary cut the core of his election manifesto. But he was the one who, in 2012, passed legislation raising the rate to 10 per cent in the first place. Unlike most other countries, Japan has spent years trying desperately to stoke inflation. Now that it finally has some, the government must ensure things don't fall back – which makes it unwise to implement moves that would, at least in headline terms, be deflationary. Leaders should also avoid reawakening another old debate – Japan's considerable debt burden. The tax is the largest contributor to Tokyo's coffers, making up more than 30 per cent of revenues. While takings have increased in recent years as the economy has recovered and inflation has risen, Ishiba must still find funds for increased defence spending and the ever-rising cost of health care and other social security measures as the country ages. Detractors say the consumption tax is a regressive measure that disproportionately penalises the poor and causes more harm to the economy than good. But there are plenty of arguments to the contrary, including that it's both hard to avoid and easy to collect. Most importantly, it's on the books right now. By international levels, Japan's rate is rather low. Future generations may well debate whether to raise it, though that is not something I would argue for now. Policymakers must resist the temptation of populist proposals. The country has been crying out for a bold economic vision for years, ever since Abenomics ran out of steam. Let's find some new ideas instead of rehashing the classics.
Japan Times
21-05-2025
- Business
- Japan Times
Don't reopen the ‘demon's gate' debate in Japan
Japan is facing a changing world of tariffs, artificial intelligence and a potentially existential threat to its exports. Yet its approaching election seems set to be dominated by a rehash of a decades-old debate. Consumption tax, first introduced in 1989 and raised over the years to its current maximum rate of 10%, is shaping up to be the major theme of July's Upper House election — a poll that will determine the fate of embattled Prime Minister Shigeru Ishiba and his minority government. With the public unhappy with persistent inflation, most recently in the form of a record surge in rice prices, Ishiba's rivals are lining up with spurious proposals to cut the sales tax or eliminate it entirely. He has pushed back, arguing that Japan's fiscal situation puts it in no position to reduce revenues. Japan's "fiscal situation is undoubtedly extremely poor, worse than Greece's,' he told parliament on Monday. While the comparison is unwise and helped to push up bond yields, it's true that the country is in no position to be cutting taxes. Calls to do so should be ignored — Japan doesn't have time to relitigate this staid discussion. Arguments over the levy are so persistent that it's long been described in media coverage as kimon, a phrase that literally translates as a "demon's gate' — from the ancient superstition that entrances facing northeast are unlucky as they allow evil spirits to enter — and refers in this context to a sticky problem or potential landmine. It has led to the collapse of governments and been blamed for triggering recessions. The issue overshadowed almost the entirety of Shinzo Abe's record-breaking time in office; and it so divided the now-defunct Democratic Party of Japan that opposition to the ruling party remains fragmented to this day, helping Ishiba's Liberal Democratic Party stay in power despite widespread public dissatisfaction. A recent survey found that more than 70% of respondents want the tax to be scrapped or reduced. Ishiba's decision to rule out a cut has given opposition politicians a chance to focus on the issue even more, with proposals to temporarily slash the levy on food to zero or reduce the entire tax to 5% until the economy improves. Ishiba's internal rival Sanae Takaichi, who tops polls of who should be the next premier, has broken ranks, backing the idea of imposing less on food. Ishiba bears responsibility for reopening the demon's gate, however: As U.S. tariffs roiled markets earlier this year, reports said the government was considering the measure. Of course, Japan is far from the only place where sales tax or its equivalents are repeatedly discussed. Singapore's move to raise its goods and services tax has been criticized for lifting inflation at a time when citizens were already feeling the pinch. Vietnam cut its value-added rate temporarily last year, which it may extend. And U.S. President Donald Trump has criticized the VAT levied by many countries as a nontariff barrier that hurts U.S. exports. But in Tokyo, the debate is both irresponsible and deeply unserious. Opposition leader Yoshihiko Noda is making a temporary cut the core of his election manifesto. But he was the one who, in 2012, passed legislation raising the rate to 10% in the first place. Unlike most other countries, Japan has spent years trying desperately to stoke inflation. Now that it finally has some, the government must ensure things don't fall back — which makes it unwise to implement moves that would, at least in headline terms, be deflationary. Leaders should also avoid reawakening another old debate — Japan's considerable debt burden. The tax is the largest contributor to Tokyo's coffers, making up more than 30% of revenues. While takings have increased in recent years as the economy has recovered and inflation has risen, Ishiba must still find funds for increased defense spending and the ever-rising cost of health care and other social security measures as the country ages. Detractors say the consumption tax is a regressive measure that disproportionately penalizes the poor and causes more harm to the economy than good. But there are plenty of arguments to the contrary, including that it's both hard to avoid and easy to collect. Most importantly, it's on the books right now. By international levels, Japan's rate is rather low. Future generations may well debate whether to raise it, though that is not something I would argue for now. Policymakers must resist the temptation of populist proposals. The country has been crying out for a bold economic vision for years, ever since Abenomics ran out of steam. Let's find some new ideas instead of rehashing the classics. Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and the Koreas.
Bloomberg
20-05-2025
- Business
- Bloomberg
Don't Reopen the ‘Demon Gate' Debate in Japan
Japan is facing a changing world of tariffs, artificial intelligence, and a potentially existential threat to its number-one export. Yet its approaching election seems set to be dominated by a rehash of a decades-old debate. Consumption tax, first introduced in 1989 and raised over the years to its current maximum rate of 10% 1, is shaping up to be the major theme of July's upper house election — a poll that will determine the fate of embattled Prime Minister Shigeru Ishiba and his minority government.
Japan Times
12-05-2025
- Business
- Japan Times
LDP and CDP see consumption tax cut as election issue
A possible cut to the consumption tax rate will be a campaign issue in this summer's election of the House of Councilors, key members of the ruling Liberal Democratic Party and the main opposition Constitutional Democratic Party of Japan have said. In a speech in the city of Kagoshima on Sunday, LDP Secretary-General Hiroshi Moriyama said: "What will be questioned in this election? One would be the consumption tax." He criticized opposition parties for advocating a consumption tax cut, saying, "In order to ensure social security, where are they going to seek financial resources for the consumption tax cut?" Moriyama emphasized, "As a responsible party, the LDP will carry out fiscal management without error for the future of the nation." CDP leader Yoshihiko Noda told reporters in Sapporo that if the ruling camp does not decide on the consumption tax cut, it would have to become an election issue. "The inaction (of Prime Minister Shigeru Ishiba's administration) will be an issue," Noda also said, criticizing the administration's failure to offer a cash handout or a tax cut. The CDP has proposed to cut the consumption tax rate on food items to zero for a limited time. Japan's consumption tax currently stands at 10%, excluding food and some other items for which the tax rate is 8%.
