In the recent Japanese House of Councillors election, the ruling coalition that promised a cash handout of 20,000 yen per citizen suffered a significant loss, while opposition parties advocating for tax cuts gained seats. It appears that the public favored tax reduction over direct cash payouts. However, economist Heizo Takenaka remarks that discussions on tax cuts, which were a central theme in the election, may be misguided. He argues that consumption tax reductions are ineffective and warns of the potential for Japan to experience another “lost 30 years.”
Key Points by Takenaka
On Price Increases:
Takenaka questions the necessity of aiding everyone affected by rising prices, suggesting that support should be targeted to those truly in need. He highlights that struggling individuals are primarily affected by social insurance burden. Therefore, policies could focus on reducing these burdens or providing direct aid to those impacted.
On Economic Growth and Tax Cuts:
Takenaka asserts that Japan’s focus has been excessively on demand-side policies, neglecting supply-side measures necessary for sustainable growth. He emphasizes that tax cuts, particularly in consumption or individual income, do not fundamentally boost economic growth and only temporarily improve conditions, much like the failed strategies of the 90s.
Immigration Policy:
Identifying appropriate policies for foreign labor is crucial. Rather than ad hoc immigration management that currently exists, Takenaka suggests implementing comprehensive immigration laws to differentiate short-term and long-term immigration, ensuring integration and cultural understanding.
Future Tax Increase Necessity:
Although reducing consumption tax isn’t beneficial now, Takenaka believes future increases might be necessary to manage fiscal responsibilities, contingent on establishing a solid growth strategy.
On Wasteful Spending and Pension System:
He points out inefficiencies in Japan’s pension system, where those without financial need receive benefits, which, if reformed, could significantly alleviate fiscal pressures. He advocates for integrated reform in taxation and social welfare, possibly through developing a digital revenue agency to streamline efforts.
Current Political Situation:
Takenaka criticizes the election for its lack of substantial policy discussions. He urges moving away from populism, which drives current policy-making and fosters superficial engagement with voters. Instead, he encourages bold leadership and implementation of economically sound policies to prevent further stagnation.
Takenaka’s insights call for a shift from populist measures to comprehensive and strategic policies addressing Japan’s economic challenges. Balancing tax reform, immigration policy, and social welfare restructuring is vital for achieving sustainable growth.
by MagazineKey4532