This discussion proposes productivity enhancement and social insurance premium reduction as more effective alternatives to consumption tax cuts being discussed as economic measures before the upper house election.
Key Points
1. Skeptical Assessment of Consumption Tax Cuts
- Constitutional Democratic Party/Japan Innovation Party: Reduce consumption tax on food from 8% to 0% (temporary)
- Democratic Party for the People: Advocates uniform reduction to 5%
- Expected intertemporal substitution effect as "non-traditional fiscal policy"
- However, European cases show varied effects (Germany succeeded, UK effects disappeared in months)
- Risk of worsening inflation unless accompanied by production expansion
2. Fiscal Constraints and Sustainability Issues
- Food reduced tax rate to 0% would reduce national and local revenues by approximately 5 trillion yen
- Consumption tax is social security revenue source, requiring alternative funding
- Difficult to restore based on past two consumption tax rate increase postponements
- Government bonds exceed 1 quadrillion yen, foreign investor holdings increased to 12% (December 2024)
- Japanese government bond rating second lowest in G7 after Italy
3. Sustainable Growth Strategy Through Productivity Enhancement
- Policy shift needed from closing deflationary gap to expanding supply capacity
- Labor productivity improvement essential for 1% real wage increase
- Growth-oriented social capital development, investment in semiconductor/battery production
- R&D support leading to innovation creation, digital transformation promotion
- METI "Industrial Structure Vision": Targets 200 trillion yen private investment, 975 trillion yen nominal GDP by 2040
4. Social Insurance Premium Reduction Proposal for Workers
- Workers' burden heavier from social insurance premiums than consumption tax (shown with data)
- Notable intergenerational disparity compared to those under 34
- 40% of health insurance premiums spent on elderly medical care
- Proposes fixed amount or fixed rate refund of employee pension/national pension premiums
- Funding secured through inheritance tax/financial income tax strengthening, income deduction review
5. Response to Trump Tariffs
- Approximately 30% of exports to US (about 6 trillion yen) are automobile-related (2024)
- Agricultural/forestry/fishery products and food exports to US limited to 200 billion yen
- Structural transformation more important than emergency support for exporters
- Long-term response needed including new market development and industry conversion
The article concludes that rather than short-term economic stimulus, a combination of productivity enhancement and targeted support for workers is needed as policy to address structural issues of stagnant growth rates and widening disparities.