Japan Proceeds Its Twice-delayed Consumption Tax Hike

Japan has raised its twice-delayed sales tax from 8% to 10% on from October 2019. With the exemption for most of the food, the new rate applies to almost all goods and services, from electronics to books and cars. As in the last increase in 2014, the tax led the country suffered from a severe economic slow down. This sorrow experience led Prime Minister twice delay the 10% sales tax increment until October 1. Probably, the higher tax rate will still have a downward economy trend that may slow down the global demand and bring trade tensions.

The rise in sales tax is both an identical or a critical move that will push the economy into recession by consumption sentiment. So, in a bid to mitigate the blow, the government has adopted measures such as rebates for certain purchases made using electronic payments amid the increase in consumption tax this time. For a 5% rebate on purchases made using electronic payments at some smaller retailers – outstripping the 2% tax rise are to be rebated to consumers. Mentioned by Martin Schulz, senior research fellow at the Fujitsu Research Institute, the rebates are designed to make the economy more productive. A fall in spending in the coming months will be expected. However, by the end of the year, Japan economy should recover.

As said by Marcel Thieliant, Japan economist at Capital Economics, the government has already pledged about half the revenues to fund free childcare. Under the plan of the government, the extra gain from the tax will be used to fund the social welfare programs including pre-school education and to settle some of its huge public debt load.

In view of the new consumption tax, the influence for tourists may be reflected extensively at its coming festive season such as Christmas or New Year.