Loophole May Keep Japan Sales Tax Low

Above, Asakusa's Nakamise Street, souvenir mecca for tourists.  Photo by Armand Vaquer.

The Wall Street Journal Online reports that a loophole in Japan's new law eventually raising the sales tax from the current 5% to 10% by 2015 may keep the tax from rising.

They report:

The provision in the law says the government should consider the overall economic situation before implementing the increase and calls for policies to achieve annual average economic growth of about 3% in nominal terms, or about 2% in real terms, by fiscal 2020. But these figures are a stretch for a deflation-hobbled Japan that hasn't seen such growth rates since the early 1990s. 

Once at the full 10% rate, the tax is expected to generate an extra ¥13.5 trillion ($172 billion) annually, which could help stem the country's mounting debt pile, now at nearly ¥1 quadrillion and equal to more than 200% of annual gross domestic product. Outside analysts and ratings agencies have stressed that a tax increase is a vital first step in repairing Japan's finances, but insist that more is necessary, including measures to boost GDP. 

This is good news for Japanese consumers and tourists.

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