RIETI Report August 2019

Make the Consumption Tax Hike an Opportunity to Steadily Raise the Wage Level

Tax hikes are always unpopular, but in Japan they are seen as a method of cementing the future of the social security system that maintains the health and welfare of its residents. People see the 10% figure and immediately begin to calculate what negative effects it could have on their spending power and economic freedom. Corporations have the same reactions, but there are other ways in which such events could be interpreted. In this month's RIETI Report, Chairman Nakajima looks at the situation and asks the question "What could happen if we took positive actions when faced with this tax hike?"

This month's featured article

Make the Consumption Tax Hike an Opportunity to Steadily Raise the Wage Level

NAKAJIMA AtsushiChairman, RIETI

Less than two months are left before the consumption tax hike. But unlike the previous cases, the so-called last-minute demand surge has not been seen clearly to date. The current consumption trend of durable goods is unexpectedly flat.

This is partly due to sluggish consumption, which is caused by an uncertain economic outlook in response to the U.S.-China trade conflict. But in addition to that, we have to admit that the government's countermeasures against the consumption tax hike seem to be helping a lot. These countermeasures include the introduction of reduced tax rates, the free-of-charge preschool education program, reward points, premium vouchers, car tax cuts, and the expansion of mortgage tax breaks.

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