Guest Post: Japan Edging Towards Sales Tax Hike by Imogen Reed

Life in Japan could be about to get more expensive.

Ichiro Ozawa

Prime Minister Yoshihiko Noda, in a move that could prove how little power a Prime Minister has, has urged Ichiro Ozawa to back his plan to double the sales tax rate. If this comes to pass, it will profoundly affect the ability of people living in Japan to purchase goods, but according to some analysts could save the Japanese economy from oblivion.

Sales Taxes

A sales tax is a government charge added to the value of any goods or services sold. This is different from a Value Added Tax (VAT) as it applies to all rather than just those deemed to be of high quality. Currently, in Japan, as anyone knows, products are subjected to a 5% charge on their value. While products are displayed at their value, without the sales tax included, everyone knows to add 5yen for every 100yen of value. This is why a 100 yen store like Daiso is really a 105 yen store. Well, Daiso is about to become a 110yen store.  A good example of this is fleet insurance. If such insurance normally costs 5,000yen per month, this would work out at 5,250yen including tax, but if sales tax is doubled, this would come to 5,500yen per month.

Hiroshige print

Implications for the People

Japan , along with countries like Norway and Britain, is already one of the most expensive countries in the world. It has, however, been boosted by a high manufacturing level, historically high wages (that are now on the slide) and high liquidity. The purchasing ability of a country’s population is called its purchasing power parity or PPP. This means that a select number of ordinary goods and services are bought in each country around the world and  the amount of money taken to get them is compared. In the International Monetary Fund’s latest PPP examination, Japan has fallen to fourth in the world rankings having been overtaken by India.

There are pros and cons to sales taxes. One of the biggest cons for a sales tax rise in Japan is that it is seen as regressive. This means that the added cost of a product or service hits ordinary people more as they can least afford changes to their budgets.  For many if not most Japanese people, a sense of identity and wealth is displayed through buying luxury goods such as designer handbags, clothes and other brands. By doubling the tax on each of these products, it makes it harder for ordinary people to aspire to these luxuries or even to afford normal products.

The Wider Economy

Japan is a consumer economy. This means that it thrives on the back of making and selling products. It makes cars, computers, game consoles, furniture, books and more delicious types of food than anyone can count. Brands like Apple and Louis Vuitton thrive in Japan unlike anywhere else in the world. It should be noted that these companies will have to make a decision when selling their products. Do they add the extra five yen per 100 to the value of the product and thus pass the cost onto the consumer? Or do they reduce the product’s value in order to absorb the tax and take a cut in profits?

Real GDP growth in Japan

According to Tim Byrne, senior vice-president and regional officer at Moody’s Investors Service, said that Japan needed to increase the sales tax in order to offset spiralling welfare costs and debts. While no one knows the true value of Japan’s debts, Byrne thinks it is time the Japanese government finally started to tackle its structural problems and debts.

“If you don’t increase taxes you’d have to issue more JGBs (Japanese Government Bonds) which moves the day of reckoning closer to the tipping point where markets demand higher risk premiums,” he said. Analysts have been waiting for the tipping point for some time as Japan has sleepwalked towards economic doom.

Nippon Keidanren, the Japanese Business Association, believes that by 2050 Japan will no longer warrant the tag of a developed economy and will suffer sustained negative growth from 2030 onwards. This report coincides with India’s rise above Japan in terms of PPP and China’s rise above Japan in terms of economic power. At the same time, Japan’s population has begun to decline year on year as birth-rates fall as the population ages.

It should be noted that the sales  tax is not the solution to all of Japan’s problems. In the past 20 years a myriad of books have been written on the subject. With Japan’s dwindling population and less job security in the nation, many poorer people are going to be consuming less in the coming years. It is possible that the sales tax will accelerate such a decline and must, therefore, be combined with other economic measures to get the economy back on track.

As for Ozawa, the veteran politician and Democratic Party of Japan (DPJ) powerbroker is due to be reinstated to the party after being suspended during his trial. Having been acquitted, he will now return to the party and his control over a number of followers. If Noda can convince Ozawa to tow the party line, he will be able to pass the sales tax hike over the heads of the opposition parties.     - Imogen Reed

Breaking! Ichiro Ozawa is Elected Japan's New Prime Minister on a "No Sales Tax Increase Platform"

Okay, that headline is a bit premature.... But mark my words... The groundwork is done. Ichiro Ozawa is about to become Japan's next prime minister. Today the guy won his court case and was "not guilty" in a scandal that has had people announce his political death over and over and over...


But, like a cockroach, darn if that guy just won't die!

Ozawa (left) Noda (right)... Seriously, which guy even looks like a winning politician scum? (Hint: It's the guy smirking - he chuckles at you!)

As I predicted in my post of April 23, 2012, "100% of Japanese Public Surveyed Against Sales Tax Increase - Noda is Toast":

Noda is out on his a*s by July. Mark my words.

Look for Ichiro Ozawa to be Japan's next prime minister. When that happens, all bets are off the table. (But it can't be any worse than what we have now!)

The news comes out today that Ozawa has been conveniently exonerated for wrong doing in a funding scandal that has dragged him down for years. This now sets the stage for his total and complete political reformation and fits him in nicely to be Japan's next prime minister. Japan Today reports in Ozawa found not guilty in fund scandal:

Former Democratic Party of Japan leader Ichiro Ozawa, one of the most powerful men in Japanese politics, was found not guilty Thursday of a major funding scandal, paving the way for a possible showdown with the ruling party leadership.

Ozawa, 69, was cleared by the Tokyo District Court of allegations he conspired with aides to hide 400 million yen he lent to his political funding body in 2004 for a land deal.

His aides had said the mistake was purely technical and their boss—who engineered the party’s 2009 election victory—had not been aware of it.

Prosecutors, who came unstuck over the use of illegal evidence, said it was “unthinkable” Ozawa had not been in the loop.

Major TV networks cleared their schedules to report the verdict, with a huge media presence at the court for a case that has gripped Japan’s political classes for years.

The timing is just too perfect. Talk about being resurrected from the dead just in time for elections (Nah! The courts wouldn't be politically motivated, would they? Nah!!! Couldn't be!!! Say it ain't so, Joe!) And isn't it, by the way, a requirement of Japan's office of the prime minister to be accused of some sort of scandal and money laundering hijinks?


Besides becoming Japan's next prime minister by July 2012 at the latest, I predict that Ozawa will be a prime minister who stays on office for at least three years and, in spite of his corrupt background as a politician (but I repeat myself) will be "better" than any of these clowns that we've had over the last 5 years.... (Actually how could anyone be worse?)


I also predict that he will have enough support to go back on his promises and actually raise sales tax.


Meet the new boss. Same as the old boss (just a lot more slick!) Ozawa the next Japanese prime minister by July 15, 2012.


I'd bet an entire case of donuts of that one.

100% of Japanese Public Surveyed Against Sales Tax Increase - Noda is Toast!

Well, I've been saying for a long time that Japanese prime minister Yoshihiko Noda, who has called for Japan's sales taxes to be doubled, will be out of a job by July of this year - especially when he keeps throwing money away! 

I've also stated repeatedly that Japan's problem of debt is not only declining revenues but a problem with Japan's government bureaucracy in not cutting of wasteful government spending. The debt and interest on that debt, along with an aging population, and energy crisis and a host of other problems will lead to our undoing. Without addressing the spending problem, Japan (and every other country in debt) will never dig out of the hole they are in. Please refer to: Japan's Noda Government Passes 200% Tax Increase - Look for Noda to be Out by July, September at the Latest: 

....Without massive cuts in today's current spending, they can raise taxes to the moon and it won't help. Either way, I predict that this tax increase hasn't the chance of a snow-cone in hell of passing into law. The Noda government is extremely unpopular. The Daily Yomiuri reports in Noda Cabinet approval ratings slides to 30%:

The approval rating of the Cabinet led by Prime Minister Yoshihiko Noda fell to 30 percent from 37 percent in a January survey conducted immediately after a Cabinet reshuffle, a Yomiuri Shimbun survey has found.

And, now, if I read the results of this survey correctly, I have 100% of the Japanese public agreeing with me. Never mind the poor reporting of the story I am about to show you by local English language news sources, let's just look at what they've reported, shall we?


According to a news story that appeared today in the Japan Today web site entitled, "58% of companies say conditions not yet ripe for consumption tax hike", it says: 

In a further sign of trouble for Prime Minister Yoshihiko Noda, 58% of companies say that conditions are not yet ripe for a hike in the consumption tax, according to the monthly Reuters Tankan business sentiment survey of 400 companies conducted last week.

Noda has been struggling to win support for a plan to raise the 5% tax to 10% by late 2015 to fund bulging welfare costs in a fast-aging society.

Of those wary about tax hikes, 78% called for sweeping administrative and political reforms, while 66% urged policymakers to present a clear outline for the future of social security. Respondents were allowed to pick more than one area of concern.

The poll underlined public distrust of policymakers who have failed for years to cut wasteful spending and curb public debt now twice the size of Japan’s $5 trillion economy - the worst among industrial countries.

Yeah. People aren't that stupid. I think that, as I've written, most people understand that unless we control spending, we can raise taxes to the moon and it won't matter. 


I've also mentioned on several occasions that I think these surveys that show any percent of the public thinking raising sales tax is a good idea are highly suspect, but today's survey takes the cake. Before I go and show evidence of that, let me just explain something that seems to have fallen down the memory hole for most people; and that is that the political party of which Yoshihiko Noda is a member of came to power in a general election in Japan on a platform that was against raising the sales tax!


The Asahi News reports in DPJ's Governing Fiasco: Party Never Challenged Finance Ministry:

The DPJ thrashed the Liberal Democratic Party in the August 2009 Lower House election with a promise not to increase the consumption tax rate for four years.

Uh, don't look, now Yoshihiko Noda and the DPJ, it's not 2013 but only 2012, you've now broken the promise that won you the election.


Can anyone say "Four prime ministers in four year?" Shoot. I knew you could. Quick! Someone cue that 80s song by Beck!

But I digress....


Back to the results of the survey. The Japan Today site reports the above. But let's look at how the Japan Times reports the very same story: "58% of poll respondents oppose consumption tax hike":

Fifty-eight percent of respondents in a nationwide survey in Japan are opposed to the government's policy of doubling the consumption tax rate in stages by the mid-2010s, according to The Tokyo Shimbun daily Sunday.

....

The survey, based on face-to-face interviews, was conducted on 3,000 people on Dec. 17 and 18 by a nationwide opinion poll body organized by Kyodo News and 38 of its members. Of the total, 1,756 replied, a response rate of about 58 percent.

Wait! What? Read that again! "58% of poll respondents oppose tax hike." Okay. Then it goes on to say that 3,000 people were polled and 1,756 replied, "A response rate of 58%."


So, I may be confused, but this convoluted sentence, seems to me could be read to mean two things:


a) 58% of 58% of people oppose a sales tax
b) Of the people polled, only 58% responded and those were all negatives; meaning they opposed the proposed sales tax increase.


Even though the reporting seems confusing, now, (b) makes sense to me. Because I don't believe that there's a people in any nation of the world who wishes to pay more sales tax... The only ones who would be in favor of a sales tax increase are people who are able to pocket that increase. I doubt that there's a working person alive who can perform that magic trick.

This looks to say to me, that "100% of poll respondents oppose a sales tax increase." But maybe it doesn't? So I asked all my friends and co-workers if they opposed a sales tax increase, and guess what? It was 100% opposed! No surprises there.


Noda is out on his a*s by July. Mark my words.


Look for Ichiro Ozawa to be Japan's next prime minister. When that happens, all bets are off the table. (But it can't be any worse than what we have now!)


UPDATE! As of last night, in my direct and informal survey, I have asked 42 people if they are against a sales tax hike. I have a solid 100% strongly against. My survey has a margin of error of zero.

Japan's Noda Government Passes 200% Tax Increase - Look For Noda to Be Out by July - September at the Latest

Two interesting articles out this morning. The first one concerns the government of Japanese Prime Minister Noda approving a 200% Sales Tax increase. Fools!

The Wall Street Journal reports in Japan passes tax increases:

The Japanese government on Friday approved a politically charged bill to double the national sales tax, taking action after prolonged wrangling within the ruling party and narrowly avoiding an embarrassment for Prime Minister Yoshihiko Noda. The Cabinet approval finally clears the way for Mr. Noda to meet his promise to bring the bill before parliament before the March deadline stipulated by the tax law, with attention now focused on parliamentary debate, expected to begin in early April.

Passage of the bill, which would raise the tax to 10% in two stages by 2015, is likely to be far from smooth.


A large bloc of lawmakers from of Mr. Noda's ruling Democratic Party of Japan is threatening to vote against it, due mainly to worries that a tax increase would derail Japan's fragile economic recovery.


Mr. Noda also has yet to win support from opposition parties who are expected to use the issue to further pressure Mr. Noda to call a general election. Their support in the upper house of parliament is vital for the measure to become law.

Here are the key points to consumption tax (sales tax) increase bill:

-- The rate will be raised to 8 percent in April 2014, before being further increased to 10 percent in October the following year.

-- Relief measures will be introduced for low-income earners, such as tax exemption with the provision of benefits.

-- Full-fledged discussions should begin on establishing a national revenue agency.

-- An economic turnaround should be set as a condition for implementing the higher consumption tax rate in the future. The government should achieve a nominal economic growth rate of about 3 percent and a real growth rate of around 2 percent, while also implementing necessary measures to achieve the target.

-- Through comprehensive examinations of economic and other conditions, the government should consider suspending the implementation of the higher tax rate or other necessary measures.


That a large bloc of his own party members will vote against this law shows that this is the death knell for the Noda government. Never mind that opposition parties are dead-set against it. I've written about how raising taxes without cutting spending at the same time will not fix Japan's budget and debt problems. I've also mentioned that until this really becomes a major crisis, then the Japanese people will not tolerate a sales tax increase. The most recently was just about a month ago: Japanese Prime Minister Says he Can Get Sales Tax Doubled - I Predict He Will Be Out of a Job by September 2012:

There won't be any sales tax increase under this prime minister. He will be out of office if he really tries to do so. The crisis amongst the public and the political circles hasn't come to a boiling point (because people don't understand how exponential growth of our debts and interest rates on those debts are going to affect us). And, until this really hits home, people will not tolerate a sales tax increase.

We're way past that anyway. Even with a tax increase, if it is not coupled with a massive decrease in government spending, it will not matter because our debts will continue to accumulate along with the interest on those debts. Past history has shown that tax increases will not help as the government will deficit spend any increase in revenues it gets. WhenNoboru Takeshita was prime minister and instituted sales tax in 1988, he claimed that it would end our debt problem. It didn't. It couldn't without a cut in spending. After years of borrowing, we are already well past double the GDP in debt. We need to begin paying down that debt before any talk of a sales tax increase will even matter. That means we must massively cut spending right now. 

This is basic mathematics, folks. 

We need to cut spending, including interest on our debt - as well as paying down that debt to under what is received in revenue - as well as having tax increases to fix the problem we are in. I am against any and all tax increases especially if they aren't coupled with massive cuts in spending - and that's not cuts in future proposed spending, that's cuts in today's current budget.

It's simple. If you get five, you cannot spend seven. 

Without massive cuts in today's current spending, they can raise taxes to the moon and it won't help. Either way, I predict that this tax increase hasn't the chance of a snow-cone in hell of passing into law. The Noda government is extremely unpopular. The Daily Yomiuri reports in Noda Cabinet approval ratings slides to 30%:

The approval rating of the Cabinet led by Prime Minister Yoshihiko Noda fell to 30 percent from 37 percent in a January survey conducted immediately after a Cabinet reshuffle, a Yomiuri Shimbun survey has found.

This trend doesn't bode well for any tax increases. Expect the next survey to have Noda in the low 20s.

In the nationwide telephone survey conducted Friday through Sunday, 57 percent of the respondents said they disapproved of Noda's Cabinet, up six percentage points from the previous survey conducted Jan. 13-14.

The approval rating of the ruling Democratic Party of Japan fell to 16 percent, down nine points from the previous survey and marking the lowest rating since the party won control of the government in September 2009.

The survey results suggest Noda is likely to face a difficult time ahead in his policy management.

Interestingly, it seems that while I was writing this blog post, the coalition government is already falling apart. Refer to: Government junior coalition partner already starting to unravel over consumption tax bill:

On Friday, PNP leader Shizuka Kamei said he would pull his party out of the coalition after the cabinet approved the bill. “We joined the government based on its 2009 election manifesto that it would not raise taxes,” Kamei said, according to TV Asahi.

This consumption tax increase proposal is dead in the water before it even gets launched. This really makes you wonder about what Noda is thinking. Proposing a sales tax increase when the economy is so bad and things are so difficult for the average person just shows how completely out of touch these politicians are to the public. They can only think of one thing and one thing only to fix budgets and that is raising taxes...


Our problems are debt... Raising taxes causes spending by the public to decrease proportionately... We need to massively cut spending! When will they ever learn?


Well, in Noda's case it won't matter if he ever learns... He's about to be out of a job.

Japanese Prime Minister Says He Can Get Sales Tax Doubled - I Predict He Will Be Out of a Job by September 2012

This just came out on Bloomberg. The current Japanese prime minister Yoshihiko Noda says he can get a consensus and coalition on doubling the sales tax rate.

Bloomberg reports in Noda Says Deal Possible With Opposition to Double Consumption Tax:

Japanese Prime Minister Yoshihiko Noda said he thinks he can reach a deal with the opposition to double the 5 percent consumption tax in order to shore up the country’s social security system.

“I believe we can come to an understanding,” Noda told journalists from overseas media organizations today in Tokyo. “I sense that our debate is beginning to jibe.”

This guy is a goner

The combination of an aging society and a declining birthrate has put Japan in an “unprecedented situation” as the government seeks to rein in soaring welfare costs, Noda said. All political parties understand the urgency and must work together as “the question is how to secure stable financing for a sustainable social security system.”

Ha! Ha! Ha! That just shows how delusional this Noda guy is... He has to say stuff like this to the foreign press. Back at home, to the Japanese press, he'd get laughed at. 

Sadakazu Tanigaki, head of the main opposition Liberal Democratic Party, yesterday said on NHK Television that “it would be best” for Noda to seek a new mandate before submitting his tax legislation. He denied media reports that he and Noda met on Feb. 25 to discuss the situation.

Translation: The LDP doesn't want to seem responsible for raising taxes or not being able to fund social security, so they know that if they can force an election in summer, Noda will be out of office and they can keep kicking the can down the road - in the same way as we they been doing for twenty years.

The LDP has it right too. Noda hasn't even been prime minister for a year yet his popularity ratings are already weak enough that he could never stand a chance of winning any kind of election at all. Twenty seven percent approval rating is disastrous. Especially if you stand on an election platform of raising people's taxes!

Why don't they take a page out of Ron Paul's playbook? Cut spending first before even talking about raising taxes and maybe you'll get public sympathy.

Forty percent of voters oppose Noda’s tax plan, compared with 46 percent who support it, according to an Asahi newspaper poll published Feb. 14. Noda’s approval rating fell to 27 percent from 29 percent the previous month. The paper provided no margin of error for its survey of 1,741 people on Feb. 11-12.

Former DPJ leader Ichiro Ozawa, who is on trial for violating campaign financing laws, today on TV Tokyo reiterated his opposition to Noda’s tax plan. Nine lawmakers left the ruling party after it approved the proposal to raise the consumption tax to 8 percent in April 2014 and 10 percent in October 2015.

Really, what's the point of this nonsense article? There won't be any sales tax increase under this prime minister. He will be out of office if he really tries to do so. The crisis amongst the public and the political circles hasn't come to a boiling point (because people don't understand how exponential growth of our debts and interest rates on those debts are going to affect us). And, until this really hits home, people will not tolerate a sales tax increase.

We're way past that anyway. Even with a tax increase, if it is not coupled with a massive decrease in government spending, it will not matter because our debts will continue to accumulate along with the interest on those debts. Past history has shown that tax increases will not help as the government will deficit spend any increase in revenues it gets. When Noboru Takeshita was prime minister and instituted sales tax in 1988, he claimed that it would end our debt problem. It didn't. It couldn't without a cut in spending. After years of borrowing, we are already well past double the GDP in debt. We need to begin paying down that debt before any talk of a sales tax increase will even matter. That means we must massively cut spending right now. 

This is basic mathematics, folks. 

We need to cut spending, including interest on our debt - as well as paying down that debt to under what is received in revenue - as well as having tax increases to fix the problem we are in. I am against any and all tax increases especially if they aren't coupled with massive cuts in spending - and that's not cuts in future proposed spending, that's cuts in today's current budget.

It's simple. If you get five, you cannot spend seven. Once you owe fourteen, even if you start getting six, you still cannot spend seven. You will have to lower your spending to under all income in order to start paying back past debt and interest or you will never get out of the hole. 

Where to cut? Well. I'm sure we can start with cutting government waste and ridiculous spending on prevention of victimless crimes like prostitution, gambling, drugs, and ridiculous police raids on establishments that have waitresses sitting at tables with customers or arresting owners because people are drinking and dancing at restaurants on Saturday nights!   

Anyway, Noda will be gone by September because he doesn't understand these basic concepts and can't do simple first grade math... 

The best thing that could happen is a massive across the board cut in government services, but, in a country that changes prime ministers every year and has elections every summer, that isn't going to happen as politicians won't cut services because they want to give away our money so that people vote for them.

Our current system is ruined and there is no way to fix it. We are sliding down a steep slope into insolvency. 

The good news is that we won't have a sales tax increase this year. The bad news is that none of these other Japanese politicians are able to grasp first grade mathematics either.... Nor will our next prime minister.

He Wants to Double Our Sales Taxes!? Japanese Prime Minister Noda Has Got To Go!

That's it. He did it. Japanese prime minister Yoshihiko Noda has got to go. He's finished his political career by stating that Japan must fix her debt problem by doubling the Sales Tax by 2015. He's finished his political future by saying that. 


And he did it on a nationally televised TV program. What a twit! 

According to a survey: (whose results I don't believe for a second) 57% of the public oppose raising Sales Tax (trust that there's no one in their right mind would would support a doubling of their taxes - so the real numbers are much higher) and Noda's cabinet's support has dropped to 29%.


Since Noda became prime minister, he had been staying under the radar pretty much since the last guy, can't even remember his name now, you remember? The guy who was prime minister during the earthquake and after the Fukushima disaster?... His wife hated him and everything?...

Ohmura Kon!... Usually can't remember this guy's name either...

Oh, no. Now, I've done it to myself. I can't remember. The Japanese prime ministers keep changing every two weeks so I can't remember their names. What was it? Wait a second. I'll ask my wife...


... a moment later...


No good. She doesn't remember either. I know! I'll look it up! Kan! That's it! Naoto Kan! What a loser.


Now, we have a guy named Yoshihiko Noda and I'l bet you a donut most of you don't know what he looks like.

Japanese prime minister Yoshihiko Noda. Remember the face, he'll be gone by Autumn.

Anyway. Pardon me. Excuse the silly levity. I think it is needed at this time. Why? Because this idiot Noda has gone on a TV show on TV Tokyo channel 7 and actually stated in public that he wants to double our Sales Taxes! No kidding.


For even thinking that, he's got to go.

Bloomberg Businessweek reports:

Prime Minister Yoshihiko Noda said containing Japan’s public debt load, the world’s largest, is critical after Standard & Poor’s downgraded credit ratings on France, Austria and seven other European nations.

Europe’s fiscal situation “isn’t a house burning on the other side of the river,” Noda said on TV Tokyo Holdings Corp.’s program on Jan. 14. “We must have a great sense of crisis.”

Noda reshuffled his cabinet last week, aiming to win support for doubling Japan’s 5 percent national sales tax by 2015 to trim the soaring debt. S&P said in November Noda’s administration hadn’t made progress in tackling the public debt burden, an indication the credit-rating company may be preparing to lower the nation’s sovereign grade.

Japan’s government, which has enjoyed borrowing costs that are around 1 percent, wouldn’t be able to manage its finances if bond yields surged to 3 percent, Noda said last week. The country risks seeing a spike in government bond yields unless it controls a debt load set to approach 230 percent of gross domestic product in 2013, the Organization for Economic Cooperation and Development said on Nov. 28.

Seriously, guys like Noda are just plain dumb. 


Why, oh why, don't any of these Japanese politicians ever come up with a new idea for fixing the debt problem? Here's a novel solution: How about CUTTING GOVERNMENT SPENDING!!!

These political wonks understand nothing about economics. May I recommend the classic book on economics, the one that, if you read it, you'll understand more about economics than 97% of all these politicians and so-called "university trained economists" and that book is Henry Hazlitt's Economics in One Lesson?


Here's the deal, Noda, since you are too busy to bother to learn anything about how the economy works, let me explain it to you: As I said, the government cannot  continually keep taking money from the productive part of society and giving it to the nonproductive part of society. If you take money from Peter to give to Paul - or, in this case, from Taro to give to Takayuki - that distorts the market and allocates money into parts of the economy that wouldn't work if it weren't for these misallocations. 


One day, someone has to pay for taking the money from Taro to give to Takayuki - like today, that's why we're in the financial mess we're in. If you increase taxes, the slow economy will get slower, and people's spending will drop in direct relation to the increase in taxes. It's a proven fact: If you raise taxes by 5% the corresponding decreasing in public spending will be 5%. Why? Because people have a certain set budget to spend on household goods. Just because you raise taxes by 5% doesn't mean mom is going to be able to pay an extra 5% for groceries. No! The amount of groceries she buys will go down by 5% in order to cover the extra taxes. It's very simple math.


Asahi News reports:

According to calculations made by Dai-ichi Life Research Institute Inc., the scheduled hike of the consumption tax rate to 8 percent in April 2014 will mean that a family of four with an annual income between 3.5 million and 4 million yen will pay an additional 72,270 yen in consumption tax, while one with an annual income between 5 million and 5.5 million yen will pay an additional 81,408 yen.

If the sales tax rate is raised to 10 percent, the additional burden, depending on annual income, will increase from between 40,000 and 100,000 yen.

Amazingly, these simple third grade mathematics seems to be incomprehensible and comes as a complete surprise to all Japanese politicians and politicians the world over whenever and wherever taxes are raised.


Also, Mish Shedlock tell us an increase in taxes will cause the yen to skyrocket in value and destroy the export economy of Japan. Japan's debt is already nearing 230% of GDP.


If Japan starts printing money, that will cause massive inflation.


The only choice is to cut government spending.


Since, Noda is incapable of that, I suggest that Japan will continue to kick the can down the road (until it can't anymore) and that Noda will be forced to resign this year. May I finally make a New Year's prediction?


Current Japanese prime minister Yoshihiko Noda won't last until the end of 2012. Good riddance.


Cutting government spending and taking the pain now is Japan's only hope. The sooner we do it, the better off the country will be. 


Any politician the world over who thinks doubling taxes is the answer to our problems will be out of a job... As s/he should be.