National / Politics

Abe rival Taro Yamamoto says Japan's sales tax hike is 'crazy' and should be abolished

by Isabel Reynolds and Emi Nobuhiro

Bloomberg

Just as Japan braces itself for a hike in the sales tax to 10 percent on Oct. 1, one of Prime Minister Shinzo Abe’s would-be rivals is calling for it to be abolished altogether.

Taro Yamamoto, a former actor who is now the leader of an upstart party that won two seats in July’s Upper House election, says the increase from the current 8 percent will put a chill on consumption, despite the government’s efforts to alleviate such concerns.

“It’s not normal to raise it to 10 percent,” Yamamoto, the leader of Reiwa Shinsengumi, said in an interview in Tokyo. “I can only call it crazy.” The psychological effect of hiking the tax to an easily calculated round number will be to prompt consumers to “put the brakes on,” he said.

Meant to help rein in the ballooning debt triggered by social security costs associated with the graying population, Japan’s previous sales tax increases have damaged the economy and hurt political careers, prompting Abe to twice delay the increase to 10 percent.

The government says this time is different, after it introduced a raft of measures meant to smooth out any rush demand ahead of the increase and return much of the initial revenue to taxpayers.

Reiwa Shinsengumi is a minnow even among Japan’s splintered opposition. Yamamoto, who starred in the brutal 2000 movie “Battle Royale” — about a group of teenagers forced to fight to the death — says he’d be prepared to work with other opposition parties to try to roll back the sales tax first to 5 percent and then to zero.

The tax hike divides the public, with 41 percent of respondents to a poll published by the Mainichi newspaper last week saying they agreed with it, while 50 percent said they did not.

In broader terms, the Abe administration has succeeded with its monetary policy but has failed to spend enough money to achieve its goal of defeating deflation, Yamamoto said. That could be funded by issuing more bonds, if necessary, he added.

“Japan is suffering from a serious disease, so you need a proper prescription to treat it,” Yamamoto said. Concerns about fiscal collapse that have simmered for the past 30 years have proved to be unfounded, while interest rates have slumped over that period, he said. Controlling excessive inflation should be the only limit on government spending, he added.

While Yamamoto’s ideas are reminiscent of Modern Monetary Theory, something the Abe administration has consistently rejected, Yamamoto said he sees his ideas as basic macroeconomics.

His party has already had an outsize impact on the Diet in one sense — the 83-year-old building had to be renovated to allow access for its two severely disabled lawmakers.

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