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Country Rankings - Japan

  • Jul 18, 2017   Japan: consumed

    On a similar theme, Japanese Prime Minister Shinzo Abe got the news he probably least wanted to hear from an economic point of view recently – that tax revenues have fallen . Famously (or infamously), Japan's fiscal situation is even more dire than South Africa's. Its public debt has grown to a level that is difficult to comprehend, and it can't even begin to start paying it down until the Government's budget is balanced, which won't happen until 2020 – a target that is looking increasingly optimistic. And this is before we consider the fiscal impact of an aging society, which is expected to drive up social security expenditure markedly in the coming years. So where does Abe go from here? The same place that Japan always goes in a fiscal crisis – the consumption tax. Inevitably, a debate about it has already begun in Japan following the recent revenue development. To raise, or not to raise, is usually the question. But, believe it or not, this time around, there is a group of lawmakers in parliament arguing for a consumption tax cut on the grounds that it would help stimulate the economy, and in turn restore tax revenues to growth. They might be right. Or they might be way off the mark with this. But that there is such a dichotomy of opinion on wider fiscal policy in Japan is something of a worry, and is an indication perhaps that nobody in Japan knows what the answer is any more. After all, how do you repay a debt of one quadrillion yen (that's about USD10.5 trillion) when you're living beyond your means? It certainly is a most consuming predicament.
    Source: http://www.tax-news.com/news/Japanese_Tax_Collections_Fall_For_First_Time_Since_2009____74724.html

  • Apr 20, 2017   Japan: filters

    There must be some sort of saying along the lines of: if you repeat the same advice often enough, eventually the recipient will stop hearing it. Perhaps somebody kept saying it to me once and I filtered it out. Anyway, if there were such a proverb then it would apply very aptly to Japan and the interminable debate about its consumption tax. Indeed, there's barely a month that goes by these days without one international economic institution or another, such as the OECD, recommending that Japan raise the rate of its consumption tax. The trouble is Japan appears to have filtered the recommendations out. And perhaps it's all the better for doing so. Certainly, Japan is going to have to make some tough decisions in the years ahead as it deals with the effect of a rapidly aging population whilst already saddled with a mountain of debt and very possibly a stagnating economy. But hiking sales tax by a few percentage points surely isn't going to be the panacea that makes the problem go away. What's more, we know what happens when consumption tax does go up in Japan prime ministers are kicked out, and people stop going to the shops. Hardly an ideal mix to promote economic health and fiscal stability. Perhaps it's time more imaginative solutions to Japan's fiscal crisis were found, but I don't see much evidence of that happening anytime soon. Economists need to shed their fixation with Japan's consumption tax first.
    Source: http://www.tax-news.com/news/OECD_Urges_Japan_To_Hike_Sales_Tax____73984.html

  • Jun 20, 2016   Japan: hesitant

    Back to the real world now, and I can't think of any country in recent history which has had such a singular focus on one tax than Japan has had with its consumption tax. The reason for this is that, as many inside Japan, and economists and analysts outside it, have come to conclude, a consumption tax hike is the only thing likely to rescue Japan from future fiscal oblivion. And there are some compelling reasons for increasing the tax. One of them is that, according to the International Monetary Fund, in dollar terms each percentage point increase in consumption tax generates almost USD20bn in revenue. That's some chunk of change for a relatively minor increase in tax, and would obviously go some way towards budget deficit alleviation and public debt reduction. And at eight percent, the tax is lower than equivalent levies in most other countries, so there is some scope for an increase. However, while consumers in other countries, particularly in Europe, take consumption taxes of 20 percent or more for granted now, such a prospect would send the Japanese fleeing from the country's shopping malls en masse. But this isn't just a highly sensitive economic issue; it's a political poison for most who touch it. This, I suspect, might have figured prominently in Prime Minister Shinzo Abe's thinking when he postponed the next scheduled rise to 10 percent. Predictably, the international ratings agencies were quick to condemn the decision as credit-negative. But the near-constant uncertainty about the tax can't be helping the situation either. Indeed, I'd be more likely to offer an encomium if Abe were prepared to jump off the fence, put his career on the line, and decide once and for all about the consumption tax. Indecisiveness is rarely the precursor to successful outcomes.
    Source: http://www.tax-news.com/news/Japanese_Sales_Tax_Delay_Bad_For_Credit_Rating_Fitch____71459.html

  • Apr 04, 2016   Japan: the long game

    Debtsome have an aversion to it, others live their life by it. Either way, it is clear that debt makes the world go round, at least economically speaking (before all you astrophysicist start writing in!). Try running a successful business without a line of credit from a bank or other lender. Try buying a house without a mortgage (unless of course, you're one of the lucky few fortunate enough to be able to buy your home with hard cash). What's more, national tax codes tend to favor debt funding over equity funding, so it's hardly surprising that many businesses are highly leveraged. However, as we experienced almost a decade ago and are still experiencing now debt can be a very bad thing if not managed responsibly, and unfortunately many banks, companies, and governments have been very irresponsible with how much debt is created in the recent past, with fatal consequences. Are we really expecting Greece, which has lost about one-third of the value of its economy through the debt crisis, to pay back all the money it has been lent by the troika of lenders? Let alone the debt it had already racked up before the crisis struck? Yet, Greece isn't even the most indebted government. That dubious honor falls to Japan, the first of this week's subjects, which has sovereign debt equivalent to approximately 230 percent of GDP. That's a mind boggling amount. Despite its recent economic travails, Japan is still the world's third-largest economy, and GDP was estimated at over USD4.6 trillion in 2015. So that makes Japan's debt worth about JPY1 quadrillion. That's 15 zeroes. If you're struggling to comprehend that, in dollar terms it's USD10.5 trillion. Or to put it in a more easy-to-visualize way, it's roughly the same amount that China's entire economy produced in 2014. Japan is more fortunate than Greece in that most of this debt is owed to domestic creditors, including financial institutions, insurers, companies, and individuals, at minuscule rates of interest, rather than to interfering foreigners wanting their pound of flesh (no names, no pack drill). Still does any politician seriously expect Japan to even make a dent in this debt mountain, let alone pay it down substantially, given its well-documented economic weaknesses and rapidly aging population? In public maybe they do, but in private I suspect they don't. To be fair to the Japanese Government, there's little it really can do in the short- to medium-term to make a difference without snuffing out a fragile economic recovery. That's why I'm going to give it an encomium this week for continuing its policy of corporate tax cuts in the recently approved 2016 Budget. There really is no point in having such a high and complex corporate tax rate if the goal is to foster a private-sector recovery. And even if Prime Minister Shinzo Abe's three arrows of recovery haven't quite hit their mark yet, his policies are showing some signs of working. The one cloud over a fairly good week for Japan is the interminable speculation about the second consumption tax rise, which is due to take place in a year's time. Abe has yet to decide whether the economy has recovered enough to withstand the likely fall in consumption that will follow the tax rise. But surely any impact on the economy is going to be short-lived, as it was with the first consumption tax rise in 2014. However, the decision is as much political as it is economic and will no doubt depend on Abe's political standing, which he is attempting to strengthen by seeking to hold lower house elections alongside a vote of the upper house later this year. Still, if I were a betting person I'd put money on another delay (although I wouldn't stake my mortgage on it).
    Source: http://www.tax-news.com/news/Japanese_2016_Budget_Approved_By_Diet____70844.html

  • Apr 21, 2015   Japan: consumed by tax

    It's a rare occasion that I agree with something the OECD says. So when it does happen, mostly begrudgingly, it's probably worth a mention. In this instance, there are some qualifications, and while I concur with the broad thrust of the OECD's report on Japan, I don't necessarily agree with all its proposed remedies. It's an inescapable reality that Japan is going to need to collect a lot more tax revenue if it is going to face the future with confidence about its ability to pay its way. And it will be a delicate balancing act between growth and austerity-type policies. But perhaps it's time to end the world's fixation on Japan's consumption tax. We've seen in the past how the Japanese economy responds to tax hikes – not very well as it turns out – and we were given more evidence of this just last year, when consumption tax increased from five percent to eight percent and economic growth took a worrying dive into the red in the subsequent quarter. Given that the consumption tax is a political toxin in Japan, Prime Minister Shinzo Abe seems to have got away lightly as a result of last year's hike. But there is no doubt he is handling the issue with kid gloves, as demonstrated by the decision to postpone the next hike to 10 percent, which had been due in October 2015. Given that previous consumption tax hikes, or just the mere suggestion of an increase in this tax, has ended the career of more than one prime minister early, it is perhaps unrealistic for the OECD to suggest that there is scope to raise consumption tax to the average OECD consumption tax rate of nearly 20 percent. That just isn't going to happen. Even in an age when the tax burden is shifting from direct to indirect taxation, as numerous tax studies tells us, it could be very counterproductive in Japan, with the country's notoriously price-sensitive consumers likely to clasp shut their wallets and purses after a sales tax increase of such magnitude. A more holistic approach to Japan's fiscal problem, and one that will encourage growth rather than throttle the economy, is surely needed. Looking in from the outside at least, it seems that measures far more radical than the modest corporate tax cuts currently in the pipeline (which are actually going to be canceled out by changes to loss carry backs) are required. That's easier said than done though.
    Source: http://www.tax-news.com/news/OECD_Calls_For_LargeScale_Japanese_Revenue_Increases____67822.html

  • Jan 08, 2015   Japan: one step forward...

    It would be carping not to acknowledge Japan's reduction of its corporate tax rate, although it is no great shakes, and still leaves Japan towards the top end of the rates table, currently and ignominiously headed by the USA. It's difficult to believe though that it will be enough to inject real life into the moribund Japanese economy. So one has to ask: what will? And the question can be asked just as well of those European countries which are bidding fair to join Japan in its deflationary stasis. The answer is not to be found in macro-economic nostrums: economic growth happens because individuals make decisions to hire workers, take an entrepreneurial risk, or get a job, if one is available, and not because government pulls a lever. Governments like to think they can influence economies by taking macro-economic decisions, but they are wrong. What Japanese businessperson is going to alter their behaviour even one jot because corporation tax has been reduced by a measly two percent? Ten percent, perhaps, but two percent? And any benefit gained from the reduction is more than wiped out by the reduction in loss offsets from 80 percent to 50 percent. Actually that is a swingeing tax increase of 10 percent for any profitable company with past losses. How can that possibly influence business investment? It is a tax rise, pure and simple. In Europe, of course, there is no question of lowering taxes; they need every penny they can find just to avoid looming default. So we need to look at the reality of animal spirits at the individual level. Our Japanese hero, Shinzo Abe (no relation) is at breakfast with his wife Yuna. He operates a small sandwich bar, and has nearly finished paying off the loan he took from a local cooperative bank to buy the sandwich stand after losing his salarimen job. He is busy out of sight with corporate lunch orders. "It'is getting you down," says Yuna, "You never laugh any more. And I never see you nowadays. Why don't you take on a helper?" "You know why," says Shinzo. "I would have to instal a toilet, and rest facilities. There is a minimum wage, there is payroll tax, there are social security payments. And there is consumption tax; we already have to charge a high price because of the cost of beef. What if the market gets weaker? If it all goes wrong and the worker is no good, it will cost a fortune to get rid of them, and I might not survive. Then our home would be in danger. It's just too risky." "But can't you take on a freeter? What about that young lad from the next street, the one who cleans our windows? He wouldn't ask much." "He's not trained," said Shinzo. "I did ask him, actually, but he lives with his parents and he wants a real job with a corporation. He's not too interested in hard work making sandwiches! If I took him and if he was willing, he would have to be a real employee, with insurance and all the other issues. There are apprenticeship programs, it's true, but he is already quite old. I'm sure he wouldn't want five years as a catering apprentice, and I am not qualified to be his master, anyway." Very little has been done in Japan to encourage job formation in such situations: no subsidized loans; no entrepreneurial incentives; no tax breaks; no employment subsidies for individual entrepreneurs; no bankruptcy forgiveness or halfway-house insolvency legislation. Of course Shinzo will battle on, on his own, and of course he won't take on an employee. Yuna offers assistance from her aunt, who has recently been widowed, has a substantial pension, and is quite keen to have something to do to take her mind off her problems. She's a dab hand at sandwich-making after a lifetime of putting together her hubbie's lunch-boxes. Yuna will give her aunt small sums of money from her own quite handsome salary as a teacher, and they will get by. It will all be strictly unofficial, and completely outside the recorded economy, and of course no tax will be paid. But a small business with the capacity to become a larger business will be stultified, to no-one's benefit at all. With minor differences, we could have been talking about almost any Eurozone economy. Until Governments get down and dirty with the reality of life as it is lived in the tenements of Naples, the banlieus of Marseilles and even the back streets of Dusseldorf, there won't be any answer to the problem. There has to be a bonfire of regulations, and widespread abandonment of taxation for start-ups; then, and only then will animal spirits ignite into a blaze of creativity and new jobs. Unfortunately, they are not capable of thinking that way in the Treasuries of Europe, and if they were, the unions and the lawyers would soon stop them.
    Source: www.tax-news.com/news/Japans_Coalition_Parties_Agree_Corporate_Tax_Rate_Cut____66856.html

  • Nov 25, 2014   Japan: meek

    India's economy has yet to peak, but most observers would agree that in the main, the country will be looking up at the summit, rather than down at the base, in the coming decades. One really does wonder whether the opposite is true of Japan, which perhaps reached its economic peak over 20 years ago and is now staring up at a debt mountain, wondering when the summit will appear. After some pretty disastrous economic data this year, Prime Minister Shinzo Abe, perhaps the most dynamic Japanese leader in recent history for his economic polices at least, got the frights and decided to cancel a consumption tax rise from five percent to eight percent, not due to take effect until next October; the first stage of the phased increase, from three percent to five percent, which took place last April, was widely blamed for tipping the country into recession. I can absolutely understand why Abe has done this. Politicians trade in the currency of popularity, so canceling what is a highly unpopular policy is a logical move. And by calling a snap election, he can resume his political career without worrying whether sliding popularity will cast him into the political wilderness prematurely. But what is good for Abe personally might not be good for the nation of Japan. Nobody likes to see taxes rise, least of all myself. But the scale of Japan's fiscal problems really is frightening. True, a good chunk of the Government's mountainous debt, worth about 230 percent of the economy and rising, is owned by the Japanese public. But unless some radical solutions are found, the problems will only compound as fewer working people attempt to support an ageing and non-working population that is increasing. Certainly, hiking consumption tax by a few percent isn't radical. But it has to be better than taking more tax from incomes, and it's a start. Abe's decision smacks of kicking the can down the road, which might be expedient in the short-term. But who knows how much tarmac is left? And this consumption tax phobia seems to be a peculiarly Japanese phenomenon. It's like a force that brings death to anyone who dares to mention it. Few other Governments are so meek when it comes to raising taxes, and the Japanese should try living in Europe, where consumers pay rates of VAT of 20 percent or more. Anyway, I have some quite controversial suggestions for Japan's age-induced fiscal crisis, which I'm just going to throw out there. The Japanese tend to live quite long and healthy lives, so a radical solution might be to abolish retirement altogether. Perhaps this could be combined with the elimination of so-called "sin taxes" on alcohol, tobacco, sugar and fatty foods to let the people work and/or drink themselves into an early grave, thus diffusing the demographic timebomb in one fell swoop. I am of course joking. Wouldn't want to give Governments any ideas...
    Source: http://www.tax-news.com/news/Japan_Pulls_Sales_Tax_Hike_Plans_As_Economy_Sputters____66440.html

  • Nov 20, 2014   Japan: all the right noises

    If foreign direct investment figures are anything to go by as an indicator of a country's competitiveness, or an economy's potential, then Japan looks to be in pretty poor shape at the moment. According to one official estimate, Japan lies 25th in the table of received Foreign Direct Investment stock, the level of accumulated FDI in a country, with USD231.2bn invested there by the end of 2013. This is less than Poland, which is positioned in 23rd place, and which has been playing two decades of catch-up after suffering years of stagnation under Communist rule. Japan, famously, entered a long period of economic deflation in the 1990s, and successive Governments, shying away from unpopular, but potentially effective, measures have struggled to find the right formula to turn this particular economic tanker around. Even so, for one of the richest and most advanced nations on earth, this figure is quite striking, and is indicative of a country that remains mistrustful of foreign participation in its economy. Perhaps this has to change. And to a certain extent it is under the premiership of Shinzo Abe and his brand of growth-orientated economic policies dubbed Abenomics. He has taken Japan into the Trans-Pacific Partnership trade talks, and a trilateral free trade agreement with China and South Korea is inching ahead. Just how serious Japan is about opening up highly protected and nationally-sensitive parts of its economy is open to debate, however. The country is at long last taking action on the tax front though. For a long time, legislators in the United States, unable to pass much needed tax cuts, could at least look to Japan and thank them for having the highest rate of corporate tax in the OECD. But after cutting the tax a couple of years ago, this unwanted baton was eventually passed to the US. Now Japan's Minister of Economy, Trade, and Industry wants to cut corporate tax again next year. A 2.5 percent reduction doesn't sound like much, and it probably won't have a great deal of effect considering that less than a third of companies in Japan pay the tax anyway because of previous losses, but it's a positive signal, and at the very least shows investors the Government's preferred direction of travel. Investors don't look solely at corporate tax rates when deciding where to risk their money; there are other considerations too numerous to mention here influencing such a decision. But corporate tax rates are in effect a country's shop window, and the more attractive the display, the more like the customer will enter.
    Source: http://www.tax-news.com/news/Japanese_Minister_Seeks_Corporate_Tax_Cut_In_2015____66391.html

  • Oct 02, 2014   Japan: stonewalling

    Maybe it's time for negotiating teams attempting to expand the Trans-Pacific Partnership free trade agreement to say "sayonara" to the Japanese delegation, with Tokyo seemingly refusing to budge from its entrenched position on protections for its agricultural and automotive sectors. Of all the world's major economies, Japan remains something of an enigma. It achieved phenomenal growth in the decades succeeding World War Two, but it remains distrustful of foreign participation in its economy, and barriers to entry to Japan's market for foreign investors are still high, despite free trade being the global norm rather than the exception these days. Indeed, foreign direct investment inflows as a percentage of the Japanese economy stand at a meager 4 percent, while the percentages for other advanced economies are in double-digits. Even North Korea manages an FDI-to-GDP ratio of 12.5 percent. As we know though, Japan has lost its way somewhat economically-speaking over the last 20 years, and the emergence of China, South Korea and other Asian economic powerhouses is providing ever-stronger competition for its exports. One sign of a doctrinal change within the Government is the morphing of Japan's External Trade Organization (JETRO) from an export promotion body to an inward investment promotional agency. So it was presumed that Japan's momentous decision to join the TPP negotiations was a part of a process to open up Japan's economy to foreign investment, and Prime Minister Shinzo Abe was widely praised as a result. But since Japan joined the talks last year, it has seemed unwilling to give an inch on these sensitive items, which rather begs the question of why it joined in the first place. Perhaps it's all part of a plan by Abe to play both sides of the fence. Taking Japan into the TPP was a natural extension to the expansionary economic vision dubbed "Abenomics." Contrariwise, by standing up to America on behalf of Japan's powerful agricultural and auto lobbies, perhaps he is strengthening his political hand at home. Whether this is by accident or by design is a moot point at the moment. Either way, after considerable progress was made in the early rounds, the negotiations have more or less come to a complete standstill, and there can be few doubts that the obstacle is Japan-shaped.
    Source: http://www.tax-news.com/news/No_Progress_For_US_Japan_In_TPP_Crunch_Talks____65942.html

  • Jul 03, 2014   Japan: winning the sprint

    If Japan sees itself as being in some sort of international competition to attract business investment, the confirmation from Shinzo Abe that the corporate tax rate will fall below 30 percent from its current level of 36 percent puts it securely ahead of the USA, which still charges around 40 percent if local taxes are factored in, and there is no sign whatever of any consensus legislation to lower the rate. Japan will also be ahead of France, whose 33.33 percent is unlikely to fall any time soon (they can't afford it), and of India, where the Government seems unable to get a long-planned reduction in its 33.99 percent rate through Congress (although Narendra Modi's new broom may change matters). Other countries on 30 percent or above include Belgium, Australia, Italy, Morocco, Nigeria, Spain, Costa Rica and Argentina. So Japan may find itself in the middle of the pack, just a few years after heading the field. Headline rates are not everything, though: reportedly, few Japanese companies pay corporate tax, either because of accumulated past losses or because of extensive tax breaks. A headline rate reduction would probably be accompanied by abolition of many of the tax breaks. But I started this paragraph with the word "if." It is not at all clear that Japan is about to compete with other major industrial powers, at least not domestically. Many of its largest sectors shelter behind high tariff walls or restrictive trading rules, as witness the soon-to-be-aborted TPP (Trans-Pacific Partnership) negotiations, in which Japan is steadfastly refusing to open itself up to US automotive competition, and seems utterly unwilling to dismantle its absurdly high agricultural tariffs (777 percent for rice, anyone?). Making all possible allowances for Mr Abe's domestic political difficulties, the corporate rate reduction seems to stack up more as a fillip for home-grown businesses than as a move towards genuine international opening.
    Source: www.tax-news.com/news/Japan_Plans_Sub30_Percent_Corporate_Tax_Rate____65085.html

  • Jun 12, 2014   Japan: living dangerously

    We are seeing a series of improbable developments in Japan, as previously unthinkable changes seem to be swallowed wholesale by an economy which was thought to be on terminal life-support. There now seems to be wide acceptance that it will be possible to make further cuts in corporate tax rates while continuing to beef up sales taxes. Even the IMF agrees that this is the correct strategy, while of course continuing to insist on the need for measures to address the country's indebtedness: 240 percent of GDP and rising. Due to the fact that a very high proportion of the debt is held by domestic savers, who have historically been prepared to accept low interest rates, the average rate paid by the Government is a mere 1 percent. But the budget deficit this year is likely to be 11 percent of GDP, far above a sustainable level, and debt service mops up nearly a quarter of current government spending. Given that Japanese tax revenue amounts to only 28 percent of GDP (ten points less than in the US and twenty points less than in Europe), the bargain between citizens and Government seems clear: we'll lend you money as long as you don't tax us too much. What happens though if savers break ranks, and refuse to continue to support the debt burden at today's low rates? The answer given by Abenomics seems to be that a dash for growth will pull the country out of its current economic malaise before the worm turns. A deeper question perhaps is to ask whether Japan can continue to be that immune to global pressures. Low interest rates are a worldwide phenomenon at present, as witness this week's rate-chopping exercise by Mario Draghi. There is not much temptation for a Japanese saver to betray her Government's national interest when the alternative is so unattractive. But the era of low interest rates will soon come to an end – it is already remarkable that so much printing of money and quantitative easing has not led to higher inflation, perhaps only because of lack of private demand for money during the debt crisis – and when it does, rates will shoot up. Japan is on a tight-rope, therefore, and you have to hope that Shinzo Abe will be able to get to the other side before the illusion shatters. From that perspective, the IMF, for once, is right, and the overriding need is for the Government to take more money from its citizens, rather than continuing to borrow it. I never thought I would say such a thing, but: "Diseases desperate grown by desperate appliance are relieved."
    Source: www.tax-news.com/news/Japanese_Corporate_Tax_Cut_Increasingly_Likely____64886.html

  • Dec 19, 2013   Japan: slams the door

    As an ardent free-trader, it gives me no pleasure at all to have been right over the extension of the Trans-Pacific Partnership trade deal to include Japan. What I can't understand is why Japan agreed to put everything on the table, and then just a few months later refuses to negotiate over its agricultural tariffs, including the crazy 777 percent levy on imported rice. Well, I do understand that in apparently changing his mind Shinzo Abe is making a carefully orchestrated domestic gesture, probably because he thinks that the American administration will be unable to get a TPP treaty through Congress without a TPA (Trade Promotion Authority), and there is no point in spending his precious, and limited, political capital and getting nothing in return. In fact, Abe has already gone a long way towards dismantling the agricultural regime that supports high rice prices, although it will be 2018 before there is much market impact. The TPA is the bigger problem, in reality: nobody supposes that Congress in its current factionalized state is going to wave through a TPP treaty that includes Japan without mauling it half to death over labor issues. There is a chance however that with a TPA in place, a majority might be obtained. The problem is that the price of a TPA is the inclusion of a "currency manipulator" clause in future trade agreements, and Japan will not wear this. Nor should it: that countries manipulate their currencies is beyond doubt – what is quantitative easing if it is not currency manipulation? It doesn't have much effect, because it's not just the Fed: the Japanese are doing it, the ECB is doing it, the Brits are doing it, and we'd probably find out that the Chinese are doing it if their monetary policy wasn't so inscrutable. So it's a zero-sum game in terms of currency values, at present. Its impact is to keep interest rates down, which is a Good Thing, short term at least. The problem with a currency manipulation clause is that it gets used, or rather, misused as a protectionist tactic by anti-trade lobbies, and this is not even a left/right issue. There are plenty of well-funded Luddites and backwoodsmen on both sides of the aisle in legislatures around the world, and it is devilishly hard to keep them at bay even when there is a level playing field. If you give them a currency manipulator weapon, it becomes impossible. So the inclusion of Japan in the TPP negotiations was a fatal error. The best thing to do is to say thanks but no thanks, get an 11-country TPP through, and then in 2017, when the dust has settled, start all over with Japan.
    Source: www.tax-news.com/news/TPP_Misses_EndYear_Deadline____62985.html

  • Oct 10, 2013   Japan: making sense

    It's rare event that I find myself agreeing with Angel Gurria, Secretary General of the OECD, but I have to join the chorus of plaudits for Japanese Prime Minister Shinzo Abe's decision to go ahead with an increase in the country's consumption tax from five percent to eight percent from April 2014. Actually, it's the accompanying support measures for business that are more praiseworthy, including accelerated depreciation for companies spending on high-technology plant and machinery from April 1 next year and – less admirably – a payroll subsidy (remember the "lump of labor" fallacy). Japan's problem is debt, oceans of it, much the highest of any significant nation at 230 percent of GDP – next comes Greece at 161 percent and Italy with 130 percent. Greece is on life-support, while Italy is being kept afloat only thanks to the printing presses of the European Central Bank and Chancellor Merkel's good offices. So how does Japan manage it? With a 10-year bond yield of 0.64 percent, that's how, and a program of quantitative easing (that's printing money, in plain English) that makes the Fed look miserly. Also, the patriotic Japanese lap up their country's bonds for their savings. Perhaps that's got more to do with Japan's relative cultural isolation than clear-headed calculation; but either way the result is a kind of zombie economy – the lost decades, as they are called. It's a very hard trap to clamber out of, once you are in it. The Tea Party is coming in for a lot of flak this week for trying to stop an increase in America's debt ceiling (a mere 80 percent of GDP), which most people take for granted should happen; but just take a look at Japan, folks.
    Source: www.lowtax.net/asp/story/front/OECD_Lauds_Japanese_VAT_Hike_Decision____62267.html

  • Sep 19, 2013   Japan: to cut tax?

    In Japan's case, Abenomics seems to be succeeding, and Prime Minister Shinzo Abe has the political space to proceed with the consumption tax hike due in April next year. He has to decide on October 1, and appears likely to bite the bullet, although accompanying it with a fiscal stimulus for business to replace some of the lost consumer purchasing power, which may either take the form of a rate cut (Japan's rate hovers around 38 percent, putting it up there with the USA at the top of the table) or equivalent incentives.
    Source: www.lowtax.net/asp/story/front/Japan_Prepares_Corporate_Tax_Relief_Against_Consumption_Tax_Hike____62048.html

  • May 02, 2013   Japan: trading with Canada

    It seems as if the Canada/Japan Economic Partnership Agreement is being Fast-tracked (must be the weather for puns), and it's probably easier for Canada to do a deal with Japan than it would be for other countries to the south - too cold to grow rice, and the automotive industry consists mostly of assembly plants and component manufacturing, with the Japanese already well entrenched. For all the complaints that regional or bilateral trade deals have the effect of weakening Doha, I am not sure that's true. Every deal that's done is another piece of Doha that doesn't need to be fought over; and it's interesting that Canada and Japan are both negotiating members of the TPP (Trade Partnership of the Pacific), so that the same understandings, deals and compromises can presumably be carried over from the one to the other; it will be the same people each time, and they can scarcely pretend never to have met before. Wouldn't you imagine, in reality, that the various putative treaties merge seamlessly into one another? Nobody actually sits down to write these 1,000-page documents. "OK, Ed," says Jun Yokota (Japanese chief negotiator), "We did all this last week in Alm-Aty, didn't we? Shall we get in a round of golf before lunch? The boys and girls can pull something together for us to look at later on." Actually there is far more recycling of texts in international diplomacy than you might imagine: I've never sat at an international trade negotiation, but I was in at the birth of the Cook Islands constitution - a girl-friend of mine knew a New Zealand lawyer who had been sent to London to write it. We'll call him John -he's quite senior now - and we had lunch together. John was laughing: "I went to the Colonial Office for help," he said, "and this old geezer in pinstripe trousers said he'd have a look. So he riffled through a filing cabinet. 'Aha,' he said, 'Just the thing, it's the XYZ islands. I'll have the names changed, get it re-printed, and send a copy round to your hotel in the morning.' Here it is," said John, having another gulp of champagne and plonking the document on the table. "Job done! and it was supposed to take me two weeks."
    Source: www.lowtax.net/asp/story/front/Canada_Promotes_Japanese_Trade_Talks____60568.html

  • Apr 18, 2013   Japan: get trade medals

    The Trans-Pacific Partnership (TPP) had a good week, with Mexico agreeing to allow Japan into the negotiations, and the US administration reaching an agreement over automobile tariffs with Japan, albeit accompanied by howls of anguish from Detroit, and ritual protestations from the usual suspects among protectionist politicians. This will clear the way for the President to give Congress 90 days' notice of his intention to begin actual TPP negotiations. It's thought that this step may happen towards the end of the month when some other existing members overcome their reservations about the inclusion of Japan. All twelve actual and prospective members of the TPP are also members of APEC, and there is an APEC meeting in Indonesia next week, which would be an opportunity for remaining issues to be ironed out, meaning presumably that Japan will have to make the right noises about opening up its agricultural sector to Australia and New Zealand. That is immediately followed by a Canada/Japan meeting in Ottawa, which may provide the final trigger for the US to go ahead.
    Source: www.lowtax.net/asp/story/front/Mexico_Backs_Japans_Bid_To_Join_TPP_Talks_____60416.html

  • Apr 04, 2013   Japan: planning a communal rice bowl

    How seriously should we take the free trade agreement negotiations between China, Japan and South Korea? Stick two pins in a map of the world, and you'll probably find that the two countries concerned are involved in one or more trade agreements, either in place or being negotiated. There are only a few hold-outs from the secular process of minimizing or abolishing cross-border obstacles to free trade; North Korea springs to mind. The WTO has 159 members and there are 24 countries in the waiting room (observer status), while the United Nations has 193 members, leaving only ten nations which aren't aspiring to belong to both. Then there is a bewildering number of regional trade groupings, amongst which the EU, NAFTA, MERCOSUR, ASEAN and CARICOM are obvious examples; but there are lots of others. Recently the Trans-Pacific Partnership (TPP) has been in the news; Japan has applied to join it, but neither China nor South Korea has yet applied to join. None of the three countries is a full member of ASEAN, but in "ASEAN + 3" the "3" are China, Japana and South Korea. All three are members of the WTO, of course. All three are also members of APEC, whose members are negotiating the FTAAP (Free Trade Agreement of Asia Pacific); at least they look as if they are, but there may be more heat than light. South Korea has free trade agreements with a number of major countries, most famously with the USA (KORUS) and the EU; one with Canada is under negotiation. Japan's negotiations with Australia for an FTA have been dragging on since 2007; but just last week Japan opened negotiations with the EU for an FTA. China meanwhile has FTAs with a scattering of smaller nations including New Zealand, and has an FTA with ASEAN. Ten years ago, apart from WTO involvements, none of our three countries seemed that interested in pursuing more thorough-going trade agreements; but based on their recent behaviour you have to allow that they have apparently changed their spots, and are giving at least lip-service to the idea of extensive free trade, even in so-called "sensitive" areas like agriculture. Are they serious? Japan's import tariff on rice is – wait for it – 778%!
    Source: www.lowtax.net/asp/story/front/China_South_Korea_Japan_Make_Tripartite_FTA_Progress____60276.html

  • Jan 24, 2013   Japan: on the primrose path

    Normally I would be complimenting any country that reduces taxes, but things aren't normal in Japan, with national debt heading for 220% and a newly-elected government which has a cavalier attitude towards economic rectitude. It's throwing a Keynesian pile of trillions of yen at infrastructure in an attempt to light a fire under the economy, and it may work in the short-term, but if history is any guide, won't be of any long-term help at all. Now, after years of inter-party struggle, the consumption tax rises which everybody (except most Japanese) agree to be critical to reforming the economy are to be negated by populist spending. Japan has had more than its fair share of disasters lately; it didn't need such a government. Obviously, not knowing the language, and at such a distance from the country, I don't understand the political dynamic. In fact I am baffled. But I know a mistake when I see one.
    Source: http://www.lowtax.net/asp/story/front/Japan_To_Extend_Housing_Loan_Tax_Credit____59237.html

  • Nov 29, 2012   Japan: can they be serious?

    As suggested in our news round-up, the FTA negotiations just starting between China, Japan and South Korea can be seen as a riposte to the American-led Trans-Pacific Partnership; but hey!, there are no bad FTAs, and this competition, if that is what it is, creates a virtuous circle of progress towards a tariff-free region. The TPP already has whiskers: originally (2005) it was a local affair between New Zealand and some of its Pacific neighbours, but for the last five years it has been much grander. China is staying aloof from the TPP, but South Korea is joining the fun, and Japan has said it wants to take part as well. But the TPP has just held its fifteenth round of negotiations, and the bigger it gets the further off seems any outcome. A touch of the Dohas, you might say. Perhaps the Japanese are just being cunning and are intent on spoiling the party? But when you look at how long it took the US Congress to ratify KORUS they probably needn't worry. The tripartite grouping is more real though: South Korea has some of the best free-trade credentials around, and will drive the negotiations hard. The sticking point will surely be the Japanese agricultural lobby? Presumably they have thought of that, so you have to assume that they are aiming for a limited agreement covering a number of industrial and perhaps financial sectors, with agriculture, fishing and other 'sensitive' sectors to follow along later. Fishing, gulp: they'll have to sort out the Spratlys and the rest before there's much chance of ratification in the Diet. It's trade that drives progress in human affairs, you see. If South Korea and China encircle North Korea in trade terms, how long could even that rogue state hold out in its ruinous anti-capitalist obsession?
    Source: http://www.lowtax.net/asp/story/front/China_Japan_South_Korea_To_Start_Trilateral_FTA_Talks____58395.html

  • Jun 21, 2012   Japan: believes something impossible before breakfast

    I hate to support tax rises, but Japan is an exception: its public spending and tax take are both low by international comparison, it has more than 200% of debt, and is drowning under the weight of its social policies. It's a no-brainer that the 3% consumption tax should be increased. At least, it is to the OECD, the IMF, the G20 and almost anyone who has been in a position to comment on Japan's economic situation over the last 10 years. But it isn't to Japanese politicians, and seems as tasty as strychnine to Japanese prime ministers, who have fallen like ninepins in recent years as a result of mentioning it. So full marks to Mr Noda, who has been clever, determined and flexible enough to get the Opposition to talk about it and even agree with it. So far. But don't hold your breath.
    Source: http://www.lowtax.net/asp/story/front/UK_Creative_Industries_Tax_Breaks_To_Be_Worlds_Best____55961.html


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