News / Asia

    Abe Bets on Breaking Japan Sales Tax Jinx as April 1 Rise Approaches

    FILE - People wait to cross the street in front of an electronic stock indicator in Tokyo.
    FILE - People wait to cross the street in front of an electronic stock indicator in Tokyo.
    Reuters
    Shinzo Abe has already ensured himself a place in Japan's history books with his comeback as prime minister five years after a brief, troubled first term. Now he aims to break another jinx by implementing a sales tax increase, a move that has been the downfall of previous leaders.
              
    Japan's sales tax will rise on Tuesday to 8 percent from 5 percent, the first increase in 17 years and the first step in a two-stage boost that is set to take the levy to 10 percent in 2015 as part an effort to curb the nation's massive public debt.
              
    Abe hopes to break the spell that has been the kiss of political death for past premiers, such as Ryutaro Hashimoto who raised sales tax to 5 percent from 3 percent in 1997 and Yoshihiko Noda who brokered a deal in 2012 to enact the current rise, only to see his Democratic Party fracture and fall from power.
              
    Economists say Abe, 59, has a good chance of surviving the rise in the tax, seen as vital if Japan is to start getting a grip on its public debt and fund the bulging social security costs of the world's fastest-ageing population.
              
    That's because the economy is in better shape now after 15 months of his "Abenomics" recipe of hyper-easy monetary policy, fiscal spending and promised reforms. Hashimoto quit in 1998 as the weak economy, battered by the sales tax rise and the Asian financial crisis, led to his Liberal Democratic Party's (LDP) humiliating loss in a national election.
              
    "2014 is not 1997," said Jesper Koll, head of equities research at JP Morgan in Tokyo. "The probability of success is better than ever," he added, citing a tight labor market, increased household and small-business borrowing and a 5.5 trillion yen ($53.44 billion) extra budget enacted in December to help cushion the impact of the tax rise.
              
    Phase two?
              
    Japan is ready to unleash more fiscal and monetary stimulus as needed if the sales tax proves more damaging to growth than expected.
              
    "We would take necessary steps," Deputy Chief Cabinet Secretary Katsunobu Kato told Reuters recently. "Each policy step would work its effects on the economy with a lag, so we'd need to mix them as appropriate depending on the situation at the time."
              
    The Bank of Japan has kept monetary policy unchanged since its intense burst of stimulus a year ago, when it launched an aggressive asset buying program to push consumer inflation to 2 percent in two years, a tough target for an economy plagued by deflation for the past 15 years.
              
    Japan's economy posted the strongest growth among industrial powers in the first half of 2013, spurred by Abe's reflationary policies, but has slowed to less than a 1 percent annual rate since then. Policymakers and private-sector analysts expect the economy to dip in the April-June quarter before rebounding in July-September.
              
    "The combination of a major tax hike and modestly contractionary spending policy will both lower growth and leave the economy vulnerable to negative shocks," Morgan Stanley MUFG Research Japan said in a report, noting that this year's extra budget was smaller than last year's.
              
    "Unlike in 1997 when the consumption tax was lifted from 3 percent to 5 percent, however, the risk of the Japanese economy sliding back into full-blown recession is limited," read the report.
              
    Abe, who took office in December 2012 promising to revive Japan's economy and bolster its military, must decide by the end of the year whether to take the next step dictated by legislation passed in 2012 under predecessor Noda to raise the sales tax to 10 percent from October 2015.
              
    Even that level is widely seen by experts as insufficient to rein in public debt that is already worth more than twice the value of Japan's economy.
              
    Whether Abe sticks to the plan, however, depends on a confluence of factors including not only the economy, but his public approval rating as well. His ratings remain above 50 percent - high for a Japanese leader after more than a year in office - but many voters dislike specific policies on his agenda, including a drive to restart nuclear reactors shut down after the March 2011 Fukushima nuclear disaster and a campaign to loosen the limits of Japan's pacifist constitution.
              
    Some 70 percent of voters surveyed by the Mainichi newspaper oppose raising the tax to 10 percent, compared to 26 percent who approve, according to a poll published on Monday.
              
    "I would guess that the sales tax rise would remain on schedule, but it could easily go in the other direction," said Martin Schulz, senior economist at Fujitsu Research Institute.

    You May Like

    Wife of IS Leader Charged in Death of US Hostage

    Suspect allegedly admitted to being responsible for American aid worker Kayla Mueller, who officials say was sexually abused and ‘owned’ by one IS member

    Year of the Monkey Could Prove Economic Balancing Act for China

    China is up against a tricky situation on the financial front, facing the need to fight capital flight while also stopping a further slide of foreign currency reserves

    Runners Attempt 26-mile South Pole Marathon in Sub-Zero Temperatures

    How alluring is running 26.2 miles at 10,000 feet when it’s minus 31 Celsius out?

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    'No Means No' Program Targets Sexual Violence in Kenyai
    X
    February 08, 2016 4:30 PM
    The organizers of an initiative to reduce and stop rape in the informal settlements around Kenya's capital say their program is having marked success. Girls are taking self-defense classes while the boys are learning how to protect the girls and respect them. Lenny Ruvaga reports from Nairobi.
    Video

    Video 'No Means No' Program Targets Sexual Violence in Kenya

    The organizers of an initiative to reduce and stop rape in the informal settlements around Kenya's capital say their program is having marked success. Girls are taking self-defense classes while the boys are learning how to protect the girls and respect them. Lenny Ruvaga reports from Nairobi.
    Video

    Video New Hampshire Voters Are Independent, Mindful of History

    Once every four years, the northeastern state of New Hampshire becomes the center of the U.S. political universe with its first-in-the-nation presidential primary. What's unusual about New Hampshire is how seriously the voters take their role and the responsibility of being among the first to weigh in on the candidates.
    Video

    Video Chocolate Lovers Get a Sweet History Lesson

    Observed in many countries around the world, Valentine’s Day is sometimes celebrated with chocolate festivals. But at a festival near Washington, the visitors experience a bit more than a sugar rush. They go on a sweet journey through history. VOA’s June Soh takes us to the festival.
    Video

    Video 'Smart' Bandages Could Heal Wounds More Quickly

    Simple bandages are usually seen as the first line of attack in healing small to moderate wounds and burns. But scientists say new synthetic materials with embedded microsensors could turn bandages into a much more valuable tool for emergency physicians. VOA’s George Putic reports.
    Video

    Video Bhutanese Refugees in New Hampshire Closely Watching Primary Election

    They fled their country and lived in refugee camps in neighboring Nepal for decades before being resettled in the northeastern U.S. state of New Hampshire -- now the focus of the U.S. presidential contest. VOA correspondent Aru Pande spoke with members of the Bhutanese community, including new American citizens, about the campaign and the strong anti-immigrant rhetoric of some of the candidates.
    Video

    Video Researchers Use 3-D Printer to Produce Transplantable Body Parts

    Human organ transplants have become fairly common around the world in the past few decades. Researchers at various universities are coordinating their efforts to find solutions -- including teams at the University of Pennsylvania and Rice University in Houston that are experimenting with a 3-D printer -- to make blood vessels and other structures for implant. As VOA’s Greg Flakus reports from Houston, they are also using these artificial body parts to seek ways of defeating cancerous tumors.
    Video

    Video Helping the Blind 'See' Great Art

    There are 285 million blind and visually impaired people in the world who are unable to enjoy visual art at a museum. One New York photographer is trying to fix this situation by making tangible copies of the world’s masterpieces. VOA correspondent Victoria Kupchinetsky was there as visually impaired people got a feel for great art. Joy Wagner narrates her report.
    Video

    Video Sanders, Clinton Battle for Young Democratic Vote

    Despite a narrow loss to former Secretary of State Hillary Clinton in last week's Iowa Democratic caucuses, Vermont Senator Bernie Sanders secured more than 80 percent of the vote among those between the ages of 18 and 29. VOA correspondent Aru Pande talks to Democrats in New Hampshire about who they are leaning towards and why in this week's primary.
    Video

    Video German Artists to Memorialize Refugees With Life Jacket Exhibit

    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video E-readers Help Ease Africa's Book Shortage

    Millions of people in Africa can't read, and there's a chronic shortage of books. A non-profit organization called Worldreader is trying to help change all that one e-reader at a time. VOA’s Deborah Block tells us about a girls' school in Nairobi, Kenya where Worldreader is making a difference.
    Video

    Video Genius Lets World Share Its Knowledge

    Inspired by crowdsourcing companies like Wikipedia, Genius allows anyone to edit anything on the web, using its web annotation tool
    Video

    Video In Philippines, Mixed Feelings About Greater US Military Presence

    In the Philippines, some who will be directly affected by a recent Supreme Court decision clearing the way for more United States troop visits are having mixed reactions.  The increased rotations come at a time when the Philippines is trying to build up its military in the face of growing maritime assertiveness from China.  From Bahile, Palawan on the coast of the South China Sea, Simone Orendain has this story.
    Video

    Video Microcephaly's Connection to Zika: Guilty Until Proven Innocent

    The Zika virus rarely causes problems for the people who get it, but it seems to be having a devastating impact on babies whose mothers are infected with Zika. VOA's Carol Pearson has more.
    Video

    Video Stunning Artworks Attract Record Crowds, Thanks to Social Media

    A new exhibit at the oldest art museum in America is shattering attendance records. Thousands of visitors are lining up to see nine giant works of art that have gotten a much-deserved shot of viral marketing. The 150-year-old Smithsonian American Art Museum has never had a response quite like this. VOA's Julie Taboh reports.