VAT IN JAPAN

JAPAN SALES TAX RISKS GROWTH GRINDING TO HALT IN 2014: ECONOMY

Andy Sharp and Mayumi Otsuma
Bloomberg Businessweek, June 27, 2012
Japan’s Prime Minister Yoshihiko Noda risks stalling the economy by pushing through a higher sales-tax that may damp consumption even as it aids efforts to tame the world’s largest debt burden.
The nation’s recovery after last year’s earthquake and tsunami could grind to a halt in 2014 when the first increase will take effect, according to UBS AG and Itochu Corp.
Parliament’s lower house yesterday approved the bill to raise the tax to 8 percent and then 10 percent in 2015 from 5 percent now. A slump would be a repeat of 1997, when an increase in the same levy contributed to pushing the economy into a 20-month recession, costing then Prime Minister Ryutaro Hashimoto his job.
“If there are no economic stimulus measures along with a consumption tax hike we can see around zero percent growth in fiscal 2014,” said Takuji Aida, a Tokyo-based economist at UBS, who raised his growth forecast for the year ending March 2014 to 2.9 percent from 2.2 percent because he sees a 4 trillion yen ($50.4 billion) rise in consumption and investment ahead of the tax increase.
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