The government on August 31 finished all the
meetings to study the
possible impacts of the scheduled sales
tax hike to 8% in April 2014
to the national economy and people’s lives.
Under legislation enacted last year, the
government plans to raise
the consumption tax from 5 percent at
present to 8 percent next April
and to 10 percent in October 2015 to pay
for growing welfare costs.
And the Abe administration has been
carefully studying the possible
negative impact of a consumption tax
hike on the nascent economic
recovery, amid concern it could weigh on
business investment and
household spending.
・Council on Economic and Fiscal Policy,
Intensive meetings
（Japanese only）
During the six day hearings to about 60
experts from Aug 26, more
than 70 percent of the experts,
including economists and business
leaders, expressed support for the plan,
with most urging the
government to take steps to prevent the
economy from slowing, such as
compiling an extra budget or reducing
other taxes. Some attendants
said a sales tax hike is necessary for
the assuring the revenue for
the social securities including
child-rearing and livelihood
protection, and others requested the
government to introduce a reduced
tax rate over the daily goods like food
as countermeasure to the
low-income brackets when the sales tax
rate is to be hiked to 10%.
Toyota CEO requested an abolishment of
the vehicle weight tax and car
sales tax.
But other experts at the hearings ? including
two economic advisers
to Abe ? were opposed to the scheduled
tax increase, saying the prime
minister should consider revising the
plan and focus on beating
chronic deflation.
Akira, Amari, economic and fiscal policy
minister, compiled and
submitted a report on the result of the
hearings on September 3. Prime
Minister Shinzo Abe will announce
whether to raise the tax after
examining the results of the next Bank
of Japan’s “tankan” business
sentiment survey due out October 1, the
Ministry of Finance’s
quarterly corporate statistics released
on September 2, the revised
growth figures for the Apr-June quarter
to be released September 9,
and other economic indicators before
making up his mind in “early
October”.
While Amari and Finance Minister Taro Aso
share the view that the
environment is ripe for a tax hike, Aso
is passive on the economic
stimulus and supplementary budget as
countermeasure to the tax-hike
whereas Amari criticizes such an
attitude by Aso and the MoF.
In the ruling Liberal Democratic Party, there
are as diverse views on
the tax-hike and some lawmakers request
the executives to hold
hearings as arena for intraparty
discussions. Yet, as the tax-hike was
put into legislation due to the
trilateral agreement by LDP, its
coalition partner New Komeito and
then-ruling Democratic Party of
Japan last year, many do not desire
putting the issue back on the
table. Also there is a concern for a
political gridlock in the autumn
Diet session in case Abe postpones the
tax-hike. As LDP plans to
submit a bill for industrial
competitiveness as part of the growth
strategy in the Abenomics, a bill to
establish Japanese version of the
National Security Council and a revised
act on the power industry in
the next session and other important
bills, the LDP lawmakers have
pressured Abe into deciding a tax-hike
as scheduled.
August 30 was the deadline for budgetary
requests by the central
government ministries for FY 2014 to the
MoF. The total request in the
general account amounted to 99.2
trillion yen and exceeded 100
trillion yen combined with the
disaster-related budget for the
straight two years. The policy expenses
amounted to 74 trillion yen,
mainly caused by the naturally-growing
costs for the social security,
the enlarged public works projects,
national defense and
infrastructure works largely demanded by
each ministry. Among them,
Health and Labor Ministry requested the
record 30.5 trillion yen, and
Land and Transport Ministry requested
5.8 trillion yen.
Meanwhile, the special government bond has
increased to 25.28
trillion yen, adding 3.1 trillion yen
from this year’s initial budget.
As the Cabinet had requested the
ministries to reduce at least 10% of
the budget as ceiling and also had
pledged internationally to cut 8
trillion yen in two years, the policy
expenses will have to be
compressed by at least 2 trillion yen.
Toward a compilation of the initial budget FY
2014, it is likely that
the MoF, other ministries and the LDP
lawmakers will heat up battling
over the budget allocations. Further,
the pressure toward budget
allocation will be accelerated by the
idea to form a large-scale
economic stimulus in the next year’s supplementary budget.
On August 29, LDP and Komeito agreed to
discuss taxation reform to
promote investments in ventures and
industrial reformation. LDP held a
subcommittee on the same day to discuss
a corporate tax reduction and
investment tax reduction, and plans to
reflect the idea into the
industrial competitiveness legislation
which the Cabinet plans to
submit in September. Yet, as the
reregulation will likely repel the
industries and ministries, it is to see
to what extent of reforms LDP
can finally propose.
At the same time, Abe Cabinet resumed
operation of the government’s
Industrial Competitiveness Council which
has been suspended since it
released the growth strategy in June to
start discussions on a tax
reduction to promote investment and the
industrial competitiveness
bill. Abe will seek stepping into
reforms of the “bedrock”
regulations in the fields such as the
agriculture, medical care and
labor.
On August 30, LDP, Komeito and DPJ agreed to
hold a meeting by the
secretary-generals to discuss the Lower
House electoral system, the
Diet reforms and social security reform
in early September. While the
ruling coalition intends to appeal to
the public that the lawmakers
are coping with these topics over the
partisan confrontation, DPJ will
cautiously see the prospect of the
meeting for a discontent that its
proposals on the social security reform
were postponed and the
tax-hike alone has been passed into
legislation. The three parties
will have a meeting sometime next week.
Lots of attentions have been paid to Abe’s announcement on his
decision whether to increase the sales
tax. While Abe will attend the
G20 summit meeting on September 5-6 in
St. Petersburg, Russia, and
explain his economic policy, it is not
likely that Abe will give
specific remarks on the tax-hike there.
Still, to see the prospect and
proceeding of the discussions carefully,
Abe’s speech in the G20
requires careful attentions, it seems.
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