Japan Press Weekly

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2014 August 27 - September 2 [POLITICS]

Abenomics & sales tax hike deal double punch to general public

Akahata editorial (excerpts)

Consumer spending and capital investment in Japan have remained sluggish even three months after the consumption tax rate was raised from 5% to 8% on April 1, according to the government’s latest economic indicators. As prices are going up, employment opportunities and people’s incomes are decreasing.

Prime Minister Abe Shinzo’s government has claimed that personal consumption will start to rebound in July after a three-month drop following the tax increase. After the second quarter GDP growth rate (from July to September) is published, the administration is to officially announce that it will again raise the sales tax rate to 10% on October 1, 2015.

The internal affairs ministry monthly report of the Family Income and Expenditure Survey shows that consumer spending in July decreased by 5.9% from the same month last year, a four-month consecutive drop since April. The purchase of furniture and household products dropped by 14.6%, clothing and footwear by 7.4%, and culture and entertainment by 9.6%. The land ministry’s statistics indicate that housing starts in July decreased by 14.1% from the same month a year earlier.

A sales tax is in principle levied on all commodities and services in the country. An increase in the sales tax causes a decline in personal consumption. A decline in personal spending dampens overall productive activities.

In the meantime, the government’s economic policy dubbed “Abenomics” has seriously affected people’s lives. The recent Consumer Price Index (CPI) shows that the general index except for fresh foods in July rose 3.3% compared to a year ago, increasing for 14 consecutive months. In contrast, the real income of workers dropped 6.2%, declining for 10 straight months.

PM Abe boasts that the number of job vacancies has increased thanks to Abenomics. Although the effective ratio of job offers to seekers stands at 1.1 to 1 in July, it is only 0.68 to 1 in terms of full-time jobs.

The Abe Cabinet has insisted that the drop in consumption and production following the sales tax hike is “within the projected range”. In reality, the recent economic figures reveal that the drop went beyond their prediction and Japan’s economy is far from recovering from the prolonged recession. The need now is to put a stop to the government plan to yet again raise the consumption tax rate next year.

Past related article:
> Personal consumption drops after sales tax is raised to 8% [June 3 & 5, 2014]