New wave of price hikes, tax-related rule changes await Japan in Oct.
TOKYO (Kyodo) -- Japanese households will see their budgets further squeezed by a new wave of price hikes scheduled for October on food and services, while freelancers and those self-employed may have to shoulder higher tax burdens under a new invoice system.
The persisting effects of a weaker yen, which inflates the prices of imported raw materials, are largely blamed for the price hikes as more and more Japanese firms pass them onto consumers. This, in turn, threatens to dent consumer sentiment when real wages are not rising.
Ideas:
Many years ago Japanese companies were reluctant to pass-on their material costs to the next in the supply chain, including the final customers, as they felt they might lose too many customers.
These days, because of the weak yen related to the variance between the US key interest rate and the Bank of Japan strategy of not increasing the key rate, import prices, from the US and other places have increased a lot.
Japanese companies, because their profits margins continue to shrink, have to choice now but pass-on their costs in order to maintain any kind of profitability.
Real wages are wages without the effects of inflation and as it goes, the extra income of wages, after paying for the basics such as rent and energy costs, households might not have much extra income left to spend in the economy.
Article:
Prices of over 4,500 food items are set to increase in October, the start of the fiscal second half for many Japanese companies, more than double the figure in September, according to research firm Teikoku Databank. The number fell by half when compared with a year ago, but it still adds to the pain already felt by consumers as everyday goods have become pricier.
J-Oil Mills Inc. is raising its olive oil prices by 14 to 57 percent, citing a heatwave hitting European producers, higher transportation costs and a strong euro against the yen. Processed meat firms are hiking prices by up to 20 percent.
Ideas:
For the past several years, Japanese companies have been passing-on their costs to the next in the supply chain, but maybe at the same time, not all cost increases effect every customer or consumer and consumers pick and choose what they want and need and maybe some product prices increases have no effect on some consumers.
But for those consumers who do see and feel the effect of price increases they might ignore the price increases, they might decide to cut-back on what they buy, they might decide to look for another product of suitable quality, they can find it.
Inflation and prices increases are very much an individual situation, as not all prices increases effect all consumes equally.
Of course the higher income groups might feel anything and not even notice the price increases, but the lower income groups might feel every price increase have have to manage their extra income very carefully.
Article:
The liquor tax revision will also come into effect, meaning that "third-category" beer-like alcoholic beverages will not be as cheap as before as Japan is raising the tax by 9 yen per 350-milliliter can. The corresponding rate for regular beer will be cut by about 7 yen.
Price hikes are also spreading to services.
A one-day high-season ticket for Tokyo Disneyland, currently 9,400 yen ($63) per adult, will cost 10,900 yen. Japan Post Co. is raising fees by an average of 10 percent for its Yu-Pack parcel delivery service.
Ideas:
Unfortunately, not to get too health coconscious here, but increasing the tax on liquor many times can be an incentive for some to change their habits and cut-back on their liquor consumption, just like any product or food that might not be good for the one's health.
Most likely, Disneyland and other entertainment services companies might be increasing their rates to make up for lost revenue during the pandemic and or as demand has increased as the Japanese government has relaxed its covid restrictions more and more people are traveling to entertainment places such as Disneyland.
As energy and other material costs increase, many service places such as Japan Post are increasing their fees. At the same time, sometimes companies will increases fees if they see other companies doing the same thing, and will think we too should increase our fees.
Article:
While the government has been limiting the rise in household utility bills, electricity and city gas prices will still increase in October. However, eight of the nation's ten major power companies plan to reduce them in November.
Prime Minister Fumio Kishida has instructed his Cabinet ministers to draw up a new economic package, including inflation-relief measures, by the end of October.
Ideas:
The power companies, if given a chance, most likely need to continue to increase prices as they have to pay for any energy they produce or import but if they Japanese government is giving subsidies to energy companies and if they are enough to cover the energy companies costs, then it might good for the households and the economy overall.
Any new budget request always comes up watered down, or not the original idea as different political factions want and need to have a say in the budget so the final budget is never what was intended. But that's the idea of a democracy where different groups all have some kind of say in decision making.
The Japanese government and the Bank of Japan, really hasn't done much in the two years related to inflation as it seems both the government and the Bank of Japan has just let inflation be natural and run its course other than a few subsidies here or there or the slight increase of bond rates.
Article:
The government has already decided to extend subsidies used to rein in rising gasoline prices, as well as those to reduce household utility bills beyond this fall.
Rising energy and food prices post a challenge for Kishida at a time of simmering speculation that he will dissolve the lower house for a general election.
Ideas:
Increasing is good for households who need them, but at the same time, it increases the debt of the Japanese government whose debt to GDP ratio is one of the highest in the world.
Any time the Japanese cabinet faces unpopularity there is always the idea of maybe dissolving the lower house as a way to increase popularity or bring about some kind of change in the Japanese government. But rarely does it solve real economic of society challenges, just like any government, globally, these days.
So as inflation continues on in Japan, and the Japanese governments seems to not be able to contain inflation and the Bank of Japan doesn't seem interest in increasing the key rate, they other alternative to political action such as dissolving the lower house with new elections.
Article:
Inflation accelerating at a pace not seen in decades threatens to derail the relatively robust economic recovery experienced in recent quarters from the COVID-19 pandemic fallout. Pent-up demand for services, such as dining out and traveling, has aided the economy up to now.
While concerns are growing about rising COVID-19 cases in Japan, people who receive treatment will need to shoulder some medical costs, including paying up to 9,000 yen for antiviral drugs, as the legal status of the novel coronavirus was downgraded to the same level as seasonal flu.
Ideas:
Japan, for many years, if not decades, was in a state of deflation and or stagnation, where the economy didn't grow much, or not much at all, and prices were depressed and didn't increase much.
This might have been good for the average consumer, but for the overall economy, it didn't bring much economic growth.
An economy needs a certain amount of economic activity, a certain flow to for it to increase and grow, but for Japan the Japanese economy was stuck stagnation for many decades.
Inflation should not be feared as it can bring about some good economic benefits but at the same time it needs to be managed correctly so that it doesn't get out of control.
At the present time, inflation in Japan, is not out of control but, at the same time, its not being managed efficiently as it needs a little more managing to help the Japanese economy to grow again.
Pent-up demand will only take the Japanese economy so far, as maybe eventually, inflation will begin to get consumers thinking they don't have enough extra income for any extra spending for restaurants or travel.
Article:
At the start of the second fiscal half, Japan is launching a new invoice system designed to accurately indicate tax payments by businesses as multiple consumption tax rates are applied in Japan -- 10 percent for most products and 8 percent for food and other specified items.
It will require the seller of a product to issue an invoice, which includes the consumption tax amount and other transaction details, to the buyer. The document is necessary to receive the tax credit.
Ideas:
Sometimes, governments have good intentions, but the extra paper-work needed for the new invoice system, might be too much for small and medium sized companies.
It sounds exactly like the tax increases the years before the pandemic such as 2014 and 2019 and when the tax increases came into affect, sales decreased and consumer demand decreased for many products.
But to the be fair and honest this might just be a strategy to make sales and other transactions more transparent, as maybe many businesses don't show the amount of tax they charge on a product.
Article:
Freelancers and others affected by the new rules have expressed opposition to the launch, joined by opposition party lawmakers. Those who earn less than 10 million yen ($67,000) a year in taxable sales and are exempt from paying consumption tax would now have to pay the tax if they choose to issue an invoice, though many are reluctant to introduce the costly system.
The hometown tax system that has gained in popularity is also changing.
Ideas:
Other than providing more income for the Japanese government, what value or benefit does it provide freelancers or others who might make less that regular office workers or small business workers.
What happens if they choose not to issue an invoice. Are they any negative effect if they decide not to participate in the system.
It seems that maybe Japan is following the Northern European or EU system of having its citizens pay more and more taxes for a good standard and good society benefits.
Article:
The program allows taxpayers to donate funds to their hometown or municipalities they want to support and get tax deductions. They can also receive local specialties in return.
The central government will reduce the ratio municipalities can spend on such specialty item from the donations. Because of that, municipalities will likely increase the amount taxpayers have to donate to receive the goods.
Ideas:
Other than more income and funds to the Japanese government and or local Japanese governments, what is the benefit to the average Japanese household.
And are all households required to join the new government plan or is it voluntary. and maybe there is no benefit for some households.
For example it the taxpayer donation a requirement and or again, can some citizens choose not to participate in the program.
Article;
On the income side, the minimum wage is set to increase gradually, with the national hourly average topping 1,000 yen for the first time.
The government will also address the issue of "income barriers," or income thresholds at which part-timers, often dependents of their spouses, must start paying or pay more income tax and social insurance premiums when their income exceeds certain levels.
Ideas:
The Japanese governments needs to be very careful about the minimum wage, as maybe some small businesses might not like the minimum wage and might actually reduce the hours of minimum wage workers they have, lay-off workers, and not hire new workers.
Again, even the "income barriers" might be an incentive for some to not work too much if the income threshold causes too many challenges for part-time workers.
So both the minimum wage and the income barriers can have challenges for different groups. Part-time workers might like the increase in the minimum wage but small businesses might not like it, and at the same time, part-time workers, and others might not like tine income thresholds where they pay more taxes on their part-time work.
Article:
Companies that pay for the social insurance premiums of such employees will receive up to 500,000 yen per worker.
The barriers are blamed for discouraging part-timers from increasing work hours. The rise in minimum pay will help such workers maintain salary levels with shorter work hours, raising concern that the country's labor shortage will become more serious.
Ideas:
At 500,000 yen per workers sounds good for workers, but again, it could be a challenge for many small and midsize company and it might be an incentive to not hire as many workers, as maybe the 500,00 doesn't cover all of the employees.
There are positives and negatives to any government plan or strategy to improve the economy or improve the lives of workers. But no plan or strategy is perfect and this plan will need to be examined carefully and watched carefully to see just what effect it has on Japanese households and workers, and the economy overall.
Japan has some serious labor shortages and maybe the latest plan might not be the best plan.
Again, as mentioned in other article commentaries, they need to eliminate forced retirement, by making a cap of salaries after 65 or 70 and let older workers, who can do the job continue to work.
At the same time, more women need to be in the workplace and more need to be in management positions and provide working women with better work/life options.
And finally, Japan needs to increase its foreign workforce which can bring in many benefits to the country. But for this last idea, Japan doesn't seem that interested in increasing immigration despite Japan having severe labor shortages in many sectors.
Have a nice day and be safe!
