Tuesday, August 14, 2012

Japan's Consumption Tax Increase Ain't Gonna Happen! Here's Why:

Wow! Sometimes I read something that just makes me smile and also, at the same time, makes me slap myself in the forehead at the stupidity of our politicians.

Today on Zerohedge, I read one of those things. The article is called, "Stupid Stuff" and it includes some great news... No new tax increases!

It's not as if the Japanese are unaware that they are headed for a debt train wreck. They have just passed new tax legislation that could make a meaningful contribution towards stabilizing Japan’s debt to GDP problem. But the new law is a sham. The new taxes will never get paid.

Japan has a consumption tax today of 5%. The new laws will raise the tax to 8% in 2014 and 10% in 2015. Moody’s thought this was a great idea, and said this about the tax hikes: (Link)

"it is an essential component of Japan's fiscal consolidation goal, achievement of which we consider necessary to maintain market confidence in Japanese government bonds."

But here's the joke; in order to get the votes to pass this very controversial legislation, there is a critical stipulation that the new taxes will not come into effect unless the country is increasing GDP at a minimum rate of 2% a year (or nominal growth of 3%).

There is no chance in hell that Japan will achieve the triggers. The folks who passed the laws know that. I think Japan deserves the annual award for the most heinous “kick the can down” tactic.

Read the rest at  "Stupid Stuff" 


Ἀντισθένης said...

Oh, about that...

Mr. Nobody said...

Hello Mike,

Will the JPG shoot themselves in the foot, when the bondholders, especially foreigners, find out that the the tax increase is basically an illusion?

Won't the JPG soon have to go more and more to the foreign markets to sell their bonds? What then?