15%

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Still riding high from their electoral landslide last month, the conservative Liberal Democratic Party is proposing to raise the national consumption tax from 5% to 10-15% in order to pay for rising welfare and pension costs. The Communists had been warning about us about this Trojan Horse scheme — first postal reform, then a hike on regressive taxes — but we ignored them (mostly because their leader Shii Kazuo looks just like Rick Moranis.)

Despite the deflation of recent years, Japan’s consumer prices are still some of the highest in the world, and while the fabled $6 cup of coffee is currently facing extinction (at least outside of trendy cafés), eating fruit on a frequent basis continues to require an upper middle-class income. I complained to some older, richer friends the other day that you can’t find meals under ¥500 in Japan, and they were befuddled as to how I was eating for less than ¥1000. I survive this student life only through constantly scraping the bottom of the culinary barrel — homemade hayashi rice, Matsuya chicken curry (¥390!), multiple McDs ¥100 cheeseburgers, Saizeriya pastas — and I still end up spending 2x every month what I did in New York City. Less than ¥50,000 a month on food, and I feel like I’ve made it under budget.

Why is Japan so expensive? Some of it comes from the fact that so much has to be imported to this rocky island devoid of natural resources. But, mostly, the high prices are a built-in welfare system. The government protects inefficiencies in the economic structure through protectionist policies as a way to increase employment. Marui Young doesn’t “need” such a massive wrapping staff, but they’ll take on the extra people as long as you are willing to pay extra for it. Efficient labor and distribution systems lead to lower prices but also less need for human inputs (at least in the short run.)

I’ve always thought this idea of placing welfare inside of private business was an ingenious way to keep incomes equally distributed and labor motivation high. But now that Japan’s high growth days are over, the high prices suppress consumer demand and kill economic momentum. And to add a 15% tax on top of these built-in “private taxes” would make Japan terribly cost-oppressive and kill off the remaining vitality of the consumerist life. Clerical workers may still save up to buy that designer handbag, but they’ll be picking up Yoshinoya for take-out for an extra month to make up for it.

Why not use payroll taxes or income taxes to solve this problem? Why use a regressive tax that primarily punishes the lower classes? Koizumi promises to avoid the consumption tax hike during his term (too busy with antagonizing Asia with Yasukuni visits, no doubt), but the ball is bouncing in that direction. Goodbye, the $6 Cafe Renoir cup of coffee! Welcome, the $6 homemade cup of coffee!

W. David MARX (Marxy)
October 25, 2005

Marxy wrote a lot of essays back on his old site Néomarxisme. This is one of them.

39 Responses

  1. Brad Says:

    And still I say that Tokyo is the home of the world’s cheapest lunch. I certainly could not find lunches like I eat everyday for less than $10 back in the States. But maybe that’s a businessman’s area thing? I tend to find a lot of cheap lunch joints in areas where there are a lot of salarymen.

    Cheap fruit is easy to find too, if you know where to look. Next time you’re around my way, I’ll show you the 18-apples-for-300-yen place. Shit goes bad before I can eat all of it…

  2. marxy Says:

    I don’t know how much you were paying for lunches in NC, but maybe too much. A good strategy in Japan is to eat your big meal at lunch for the reduced “lunch set” price and then a light dinner at home. Do it backwards and you’ll be spending 2500 yen to have Indian food.

  3. Carl Says:

    If Japan likes employing people in crap jobs as a form of employed welfare, how come I gotta bag my own groceries?

  4. Chris_B Says:

    marxy: if you worked you might not be so quick to talk of raising income taxes, they are already kind of harsh even compared to NYC where I paid city, state and federal income taxes. Also consumption taxes “punish” everyone equally but perhaps the lower income workers more proportionally.

    Considering how the economy is based on domestic consumption to begin with, this cant be a good idea. No surprise that there will be a hike, 5% is very low and they’ve been signaling a rise for years now.

    Truthfully, I’d appretiate some more transparency in the taxes though. About 6 or 7 years ago, they raised the tax on a pack of cigs by 20 Yen. Not to pay for health care or to deter smoking through punative taxes, but to pay off what ammounts to the real estate speculation debts of the JR from back before it was privatized. No mention in the news at the time of how much that debt was or when it was expected to be paid off or if they would drop the tax afterwards (of course).

    Oh, as a tip to you, hook up with someone with a Costco membership. Bulk foods there are much cheaper.

  5. Carl Says:

    The thing about taxes is, you tax what you want to discourage people from doing. As taxes go up, people will act to avoid the tax by reducing the behavior that incurs it. Since Japan’s problem is supposedly too much savings and not enough spending, how does it make sense to tax consumption instead of something on the savings end?

  6. Jrim Says:

    Sorry… ¥50,000 a month? On FOOD? For once, I feel strangely glad that I live in Nagoya. If you want to get cheap fruit, just go and befriend the staff at some mom’n’pop grocery store. Oh, wait… do they have such things in Tokyo?

    Oh, completely unrelated, but I thought you might enjoy this hilariously wide-of-the-mark article from the Sunday Times about women in Japan. My dad forwarded me the link, and I must say it really made my day.

  7. marxy Says:

    Savings in Japan have been in decline since the 80s, when everyone realized that buying a house was near impossible. I think the savings rate is still higher than other countries, but most people are describing Japan in the 70s rather than today.

  8. Momus Says:

    God, that Sunday Times piece is complete bilge. Good only for confirming Ariel Levy’s thesis about raunch feminism.

  9. henryperri Says:

    The “built-in welfare system” that you refer to sounds nice on the surface–High unemployment is generally bad. But with the resultant higher cost of goods comes less foreign purchases. The effect is that tax revenues suffer and ultimately the public will suffer.

    More progressive taxation would mean more strain on corporations and the investor class, which would discourage not only hiring at existing companies, but investment into brand new companies that create jobs.

  10. nate Says:

    I’m with brad. Eating out in tokyo is cheap, so long as you do it alone. Places that cater to individuals like hanamaru or tenya or the million ramen shops are not expensive at all. But they’re “shovel it in” style places with no atmosphere. If you’re not pouring your own water though, it instantly triples the price.

    hijack aside… wouldn’t such a huge hike in consumption taxes be a huge windfall for the feds here? What is it that they are so desperate to do that they need all this money? Or is this just what’s necessary to continue the sort of pork that’s always existed? I don’t see where it fits in with any kind of reform at all.

  11. marxy Says:

    Japan is in massive debt, and the demographic crisis is only going to make it worse. This tax is seen as the easiest solution.

    Ramen costs usually 650-900 yen and I’m hungry about 45 minutes later. The problem with me is more of portion size and protein. I need 1000 calories a sitting or so or I just go into energy crash. If I could get by on white rice and vegetables, I’d be a lot wealthier.

  12. Carl Says:

    Well, there’s always the MacDo Double Cheese Egg and Side of Congestive Heart Failure Burger Setto. That’s pretty good, actually.

  13. Michael McCarthy Says:

    1/2 Loaf of bread = .99
    6 slices of ‘meltable’ cheese = .99
    1 tub of butter = .99

    add bacon, green peppers, etc = .99

    == yummo grilled cheese sandswhich. I’ve eaten more grilled cheese sandwhiches lving in Japan than I probably ate my whole childhood.

  14. womble Says:

    As i said in a previous post, a large part of the reason you’re used to such ridiculous prices is because you live in Tokyo. My jaw drops frequently whenever i go to buy food whilst visiting Tokyo.

    Near my house in Kobe there is a very nice bento place that sells large, fairly good bento boxes for 250 and 300 yen. If i time it right i can get bento from my local supermarket for less than 100 yen when they close for the night. It’s not glamorous and it’s not exciting, but it means i can spend more money on things like Kobe beef when i get paid:)

    I really don’t know how anyone can live in Tokyo for more than a week at a time; I get off the shinkansen in a zen like relaxed (and usually slightly tipsy) state and then have to take 2 local trains to get to my company apartment. It’s absolutely guaranteed that i will want to beat somebody to death with their own shoes before i reach my destination…

  15. nate Says:

    I realize that the lack of babies (and proliferation of pinwheels at temples) is some kind of problem in the long run, but what really seperates this brand of doom and gloom predictions about the future of society from past condemnations of the behavior of the upcoming generation and their “inevitable” consequences?

    To my knowledge, no country has actually fallen prey to the dreaded demographic plague, and none that opens its borders to some kind of reasonable immigration really needs to. Though maybe taxing is just an easier idea to deal with for a certain powerful set of people in japan.

  16. nate Says:

    that is to say “we’ll burn the economy down before we let those barbarians enjoy it”.

  17. Chris_B Says:

    marxy sez everyone realized that buying a house was near impossible.

    Then how did I manage it with comparably little savings? Methinkst the pendulum swingeth the other way lately.

    momus: we agree on something. that article was horrid.

  18. r. Says:

    there are some smart boys here, so i’m sure that you’ll find some way of relating this:
    http://www.asahi.com/national/update/1024/TKY200510240100.html
    to the current discussion.

  19. Momus Says:

    Er, taxation is a kind of “screaming machine” for adults?

  20. dzima Says:

    Momus, 絶叫マシン= rollercoaster.

    You can see a half-pipe on top of the Don Quijote buiding in that photo.

  21. nate Says:

    A teacher just asked me to give his junior high 3rd year students “12 to 15 questions about japanese culture that [I] still don’t understand well”. They’re going to take a week to work on it.

    I’m at an utter loss. Anyone of you got something that a semi-rural japanese 15 year old could enlighten you on?

    (I don’t imagine they have much insight into oedipus or the influence of the jimusho, but I do plan on asking about LV bags.)

  22. marxy Says:

    Let me give you the first three that they’re looking for:

    1) How in the world can you use chopsticks instead of a fork?
    2) How in the world could you possibly eat raw fish?
    3) How in the world could you possibly eat natto?

    Here’s some bonus ones to tack on at the end:

    13) How is it that a Class A war criminal became prime minister in the 60s?
    14) Why do Japanese companies all own books that list burakumin members?
    15) Why are there so many dams on Japanese rivers?

  23. marxy Says:

    To my knowledge, no country has actually fallen prey to the dreaded demographic plague,

    Right, Japan is going to be the first. The population may actually start to peak this year, which as you stated, is a problem that would not exist if they’d just allow more immigration. Japan has no “demographic” problems – just a mental block about opening the borders. So instead of expanding the working population to create revenue, they’ll double tax the existing generation.

  24. nate Says:

    nah, the teacher knows me, and asked the first time we met we had a long conversation about september 11th. He sees it as a showdown between christianity and islam…

    It was kind of a rush job because I decided to take the afternoon off, but I posted the questions I’m just about to fax on my (rather pathetic) blog… misterdoctor.blogspot.com

    actually, I think I’ll amend the dams question to the end before I send it off.

  25. r. Says:

    nate :

    let me give you the some more that they’re looking for:

    4) why do female members of the diet get paid less than the male ones?
    5) why does the potential non-monetary ’empowerment’ (i.e. sexual) of the women in the question above get called ‘rockism’ by some people?
    6) why do japanese women refer to themselves by their own name so often?

    other bonus questions:

    * please explain the irony behind the fact that the first two kanji in ‘yasukuni jinja’ are read ‘seikoku’ when written alone, this meaning ‘national pacification’.
    * please explain why japanese people use the word ‘asia’ in japanese to refer to all the countries surrounding japan, but not including japan.
    * please explain why roddy schrock was shaken down by the cops here for doing nothing but walking down the street.

    super bonus questions:
    * please explain why the “screaming machine” for adults in roppongi is a bad idea. (don’t tell them that metaphorically, roppongi is already a BIG “screaming machine” for adults…)

  26. marxy Says:

    4) why do female members of the diet get paid less than the male ones?

    This is easy: Japanese women are the most liberated women in the world, so they don’t actually need the extra income.

  27. nate Says:

    I asked an imaginary student just now. He said roddy schrock was asking for it with such a funny and (for them) hard to pronounce name. They said the cops can sense that stuff.

    Lotta beef you got with japan there, r.. With recurring mad cow, I wonder how you got that past customs.

  28. Jrim Says:

    This is easy: Japanese women are the most liberated women in the world, so they don’t actually need the extra income.

    What, you read that Sunday Times article too…? I’m contemplating a shift to the freeter lifestyle, myself. “Work three days a week in shops and spend the rest of your time chasing creative dreams”? Bring it on!

  29. erikhw Says:

    So, why are there so many dams on Japanese rivers?

  30. Momus Says:

    Yes, let’s run in endless circles around Alex Kerr’s feet, shall we, barking like chihuahuas!

  31. marxy Says:

    Yeah, if it weren’t for Alex Kerr, Japan would have the exact right number of dams.

  32. r. Says:

    nick is the only one here who prefers chihuahuas.

  33. alin Says:

    Asia is a european concept right from the start isn’it ?

  34. Chompsky Says:

    4) why do female members of the diet get paid less than the male ones?

    What is your source for this? Members of parliament are all paid the same salary, as far as I know.

  35. Chompsky Says:

    Further to last, this googled page says that the basic salary for ALL members of parliament is 16 million yen a year. It doesn’t say anything about salary difference between male and female MPs?

    http://seiron.org/mechanism/giin.htm

  36. alin Says:

    So, why are there so many dams on Japanese rivers?

    becuse there has been a dam boom a few decades ago. it’s pretty much over. there might be a de-daming boom sometime soon.

  37. marxy Says:

    A “Dam Boom”? I think this underplays the reliance of local economies on construction payouts. You’re treating it as if “Japanese have a lot of dams because the Japanese like dams.” Would there still be so many dams if the political system did not work in terms of subsidizing infrastructure work?

  38. Chris_B Says:

    they don’t like dams?

  39. Carl Says:

    Japanese love dams. They get construction jobs and kick back from them.