Consumption Tax Hike Japan 2019

So it’s been more than a week since the consumption tax hike here in Japan. I haven’t experienced anything earth shattering since then. Considering all the media attention and the panic that ran rampant in the streets regarding this issue before October 1st, I find the second week really underwhelming.

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Calendar  showing the 10% consumption tax price in the parenthesis

But let me back track a little.

Essentially, the Japanese government, under Abe’s leadership, needs to make money to fund the social programs. No big news there. This is what governments usually do. They had originally planned on raising the current rate from 8% to 10%. But a lot of people put up a stink and complained–understandably. Nobody wants to pay more taxes. And, the tax hike affects a lot of the elderly Japanese who depend on their fixed-income pensions. They are a powerful voting block.

To compromise, the government decided to do things in half-measures. So what they decided, in their infinite wisdom, was to raise SOME goods to 10% while the rest stayed the same.

What are those goods?

I have no idea. I didn’t pay attention to the news too much, I’m embarrassed to report.

From what I understand, though, most of the consumer goods and services (physical goods and also alcohol) went up to 10% but food prices remained at 8%. However, some food is taxed at the higher level. If you buy something at a store, let’s say a convenience store, you pay 8% consumption taxes on goods that you take home with you. If you choose to eat something at the store, at that location, the taxes go up to 10%. Dining out at restaurants is at 10%.

Confusing?

Yep.

In a land full of elderly people, a lot of them were confused, to say the least. In the food industry, don’t forget that cash registers have to deal with both tax rates. I feel bad for the people who work in food stores.

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Digital registers at our local grocery store that need to adjust for both 8% or 10% tax. 

So the tax hike had everyone panicking with the rise in prices. You had lots of people stocking up on goods before the rate went up. People were buying lots of things that they needed for everyday life, like toilet paper, beer, and other things. Remember, nonfood stuff are taxed at 10%. This includes alcohol.

Me, I only stocked up on my train passes. But in my excuse, the tax hike coincided with the train company’s decision to raise the price of the fares. So in essence, I had two increases to deal with. My one-way fare went from ¥450 to ¥540. That’s quite a steep rise. So I bought about three months worth in train passes. I wasn’t the only one, though. I saw many others doing the same thing.

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New board reflecting new prices in train fare. Used to be ¥450 now ¥540 to Sapporo (yellow)

Funny thing is, about four years ago, a similar incident happened. Our consumption tax went from 5% to 8%. That’s a larger jump than the recent tax hike. But I don’t remember people behaving like that in 2015. Maybe it was my ambivalence, or disinterest in the news, but I really don’t remember people freaking out and stocking up on stuff before the tax went up. Maybe this time around, I was paying more attention so it felt like people were going crazy.

But honestly, though, this is all part of life. We all know that inflation happens–it’s the same with taxes. I just always assume that taxes will go up. It will go up again in a few years, I’m sure. So there was no reason to get caught up with the hysteria of stocking up and spending a whole bunch of money on things before prices went up. Advertisements prompted/tempted people to buy a lot of stuff–expensive things like cars, appliances, homes, etc., before the tax hike.

I get it. But still.

I didn’t change my behavior. We tried not to get caught up in the buying frenzy. Also, I am content to use the stuff we have now that are still working. No need to buy something new or to upgrade just so that I can “save” money on taxes. I still don’t get the logic in that.

But I do understand that for people struggling in the lower income brackets, the increase in the price of daily necessities is huge. Unfortunately, many companies felt that since an increase in the tax was coming anyway, they raised their prices on goods to go with the momentum. So those struggling will feel it more than those who are well off.

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1kg bag of floor has no indicator of tax, which means it stayed at 8% because it’s at food level 

I feel blessed to say we’re financially secure enough to not worry about the tax hike.

I know we’re luckier than most people.

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