Japan Press Weekly

Tweet

2013 October 2 - 8 [ECONOMY]

Consumption tax rate will increase to 8% amid uncertain economic outlook

Prime Minister Abe Shinzo on October 1 announced that he decided to increase the consumption tax rate to 8% from the present 5% because the country’s economy is showing signs of recovery.

However, all economic indicators released on the same day showed the opposite.

In August, the number of unemployed was 2.72 million, up 210,000 from the previous month. Monthly cash earnings per employee totaled 271,913 yen on average, down for two consecutive months. Base pay, which in August was 259,921 yen, went down for 15 months in a row. Average consumer spending per household amounted to 284,646 yen, down 1.6% from one year ago.

Prime Minister Abe said his government is ready to use six trillion yen for additional large public works projects and for tax breaks for corporations and investors in order to help buoy an economic slowdown possibly caused by the planned consumption tax hike.

He is touting that corporate tax cuts will be an effective way to increase wages, but wages in general have been decreasing since the reduction in corporate taxes in 1997. In contrast, large corporations’ internal reserves have been increasing.

Another tax break obviously would not bring about any positive effect on wages, reported Akahata.

Abe also says he will grant employers, who give a pay raise, an extra corporate tax cut. However, more than 70% of corporations are in the red and thus cannot afford to pay their corporate taxes. These companies are ineligible to receive corporate tax breaks in the first place.

According to Nikkei Sangyo Shimbun on September 24, only 2.7% of employers in the daily’s questionnaire survey stated that they will consider boosting their employees’ wages.

Abe’s logic that more corporate tax breaks will produce more wages is nothing but deceit.