Archive for April, 2012

Ruling party ends up back where it started with assistance for families

Friday, April 27th, 2012

We’re almost a month into the new fiscal year so it’s high time to review any changes in the cost of living for the average person in Japan. Not counting consumer spending, for the most part the change is negligible. Premiums for national health insurance have gone up for those who belong to the kyokai kenpo system, meaning mainly employees of small and medium-sized companies, from 9.5 percent to 10 percent of salary amount, which works out, on average, to an extra ¥780 a month. The long-term nursing care insurance payments (kaigo hokenryo) for persons aged 40 to 64, whether employed or not, have increased from ¥4,516 to ¥4,697 a month. Reflecting deflationary trends, payouts of basic pension have been reduced by 0.3 percent, but premiums have gone down from ¥15,020 a month to ¥14,980. Unemployment insurance has also been cut from 1.2 percent to 1 percent of salary amount. Utilities are going up. Electric bills will increase from ¥17 to ¥42 a month for an average family, and gas bills will increase from ¥8 to ¥11 a month.

Surprise! Local tax bill for Arakawa Ward, Tokyo, first quarter fiscal 2011

These changes won’t have a major effect on the average household. But one change that may is the shift in tax rules related to the child allowance (jido teate), which was one of the central proposals of the Democratic Party of Japan’s manifesto when it became the ruling party. The DPJ won on the assumption it would pay out ¥26,000 a month per child. By the time the opposition parties got through tearing the proposal apart, the amount had been cut in half, but that payout only lasted a year.

Starting in April, the allowance, which used to be called kodomo teate — the change to jido was supposedly implemented to placate the Komeito Party, who originally came up with the idea years ago under that name — will pay ¥15,000 a month for a child under 3 years old; ¥10,000 a month for the first two children in a family from the age of 3 until they graduate from elementary school; ¥15,000 a month for each child after the second one in the same age group; and ¥10,000 a month for each child in junior high school.

However, in order to get the opposition to accept even this reduced child allowance system, the DPJ had to abolish the dependent child tax deduction starting with tax returns for fiscal 2011, which were just filed this spring. In effect, it means that parents can no longer claim children up to high school, meaning less than 16 years of age, for a tax deduction since they are eligible for the child allowance. High school age children are not eligible for the child allowance so they can still be used as a tax deduction, but the amount of the deduction has been reduced from ¥630,000 to ¥380,000, because the government has now made high school free for everyone, including students who attend private institutions.

Where this change will be felt most immediately is on the local tax (juminzei) bills everyone receives in June. Local tax is calculated based on the national tax returns filed by the middle of March, so because these dependent child deductions no longer apply, individual households’ taxable incomes will increase, meaning the households will see an attendant increase in their local tax bills. Of course, it also means higher taxes on the national level, too, but since these changes weren’t implemented until last fall and salaried workers’ taxes are calculated by the bookkeeping departments of the companies/organizations they work for, they probably didn’t notice the slight monthly increase in their pay statements. They will certainly notice it on the local tax bills, since it shows the amount for the entire year. (It also affects the premiums paid for national health insurance since premiums are based on the previous year’s taxable income.)

So what does this mean in yen terms for the average family? According to the Ministry of Health, Labor and Welfare, taking into consideration both the child allowance payments and the boost in tax liabilities caused by the loss of the child deduction, an average family consisting of one breadwinner earning ¥3 million a year, one full-time homemaker and one child will end up with ¥667 more per month than they had before the DPJ came to power. The same family making ¥5 million a year will end up with ¥375 less per month. If income is between ¥8 and ¥10 million, the average loss is ¥4,083, and if it’s over ¥15 million it’s an average deficit of ¥8,200 a month. To put it another way, according to Sankei Shimbun, the average family making more than ¥4.88 million a year will, on balance, pay more than they did before the DPJ was elected. It’s as good an illustration as any of where politics gets you.

Government shows awareness of something called ‘child support’

Friday, April 20th, 2012

Divorce in Japan can be ridiculously easy. If the two parties are in agreement about breaking up, all they have to do is go down to their local government office, fill out a rikon todoke (divorce notification) and give it to the Man. No fuss, no muss, no grounds. In fact, both parties don’t even have to be present, as long as their seals are affixed to the document. About 90 percent of all divorces are carried out in this “mutual consent” (kyogi-teki) way.

Page 2 of divorce notification with "minor child" box in lower right corner

Starting this spring, however, the notification form has a new box in the lower, right-hand corner. The box concerns “minor offspring.” If the couple has a child under the age of 20, they are required to check this box, though if they don’t nothing will happen. The divorce will still go through. According to a recent article in the Tokyo Shimbun, when someone goes into his or her city hall and asks for the divorce notification form, the clerk is supposed to explain the purpose of this new box and encourage the person to check the appropriate statements if he or she has children, but in principle such disclosure is voluntary.

The purpose of the new box is to promote greater awareness of children’s position in a divorce with regard to visitation and child support. The Ministry of Health, Labor and Welfare has said that children’s welfare should be prioritized by parents who are divorcing, and the box is a nudge to get them to at least think about visitation and child support before they finalize their divorce.

As it stands, both concepts are still very weak in Japan. In a 2006 survey conducted by the ministry, only 34 percent of single parents who went through mutually agreed upon divorces (meaning no lawyers, mediation or courts) said they had made verbal agreements with their ex-spouses to the effect that the latter would pay something in the way of child support. However, in reality, less than 19 percent actually paid, and 60 percent of all divorced custodial parents have never received any assistance from their ex-partners at all.

In the United States it’s the opposite: 60 percent of custodial parents receive child support from the non-custodial parent. In 2005, the average amount of this support was $6,200 a year, regardless of how many children are being supported. In Japan, the average child support payment among non-custodial parents who actually do pay is ¥42,000 a month, which works out to be about the same. According to research carried out by the Japan Institute for Labor Policy and Training, in the U.S. when custodial parents don’t demand child support it’s usually because they don’t need it; while in Japan a custodial parent usually doesn’t demand it because she doesn’t think her ex-partner can pay. In such situations, they don’t even think about alimony.

Continue reading about child support in Japan →

Outlet malls another American concept that may not work in Japan

Monday, April 16th, 2012

Can't get there from here: empty storefronts at Big Hop Garden Mall

This weekend marks the grand opening of Mitsui Outlet Park Kisarazu, a so-called outlet mall in the coastal city of Kisarazu in Chiba Prefecture. So far the mall has 171 stores, including 21 retailers that have never before participated in any Japanese outlet mall. Mitsui Fudosan, which developed and manages the facility, says it hopes to eventually have 250 stores in the mall. Its sales target for the first year is between ¥32 billion and ¥34 billion, which would make it the biggest money-maker of the 12 outlet malls the company operates.

Mitsui isn’t the only developer staking its future on the success of American-style suburban shopping complexes. In Japan there are now 39 outlet malls, which are characterized by stores that are directly owned and run by manufacturers. In principle, that means cutting out one or more middlemen and offering greater savings on name-brand goods. According to the most recent statistics we could find there are more than 1,600 “shopping malls” in Japan, though most of these are urban complexes that vary significantly in style and form from the classic American-style shopping mall.

Nevertheless, over the past decade or so, the number of shopping malls has increased in suburban areas as more traditional shopping arcades (shotengai) have declined in number or even vanished. The main features of these suburban shopping malls is one or two large “anchor” retailers, usually a department store and/or major supermarket chain, and, most significant for Japan, the fact that they aren’t located near train stations, where land is more expensive. That means they target motorists and feature the sort of enormous parking lots that are ubiquitous in the United States but which, until recently, were unheard of in Japan.

Outlet malls don’t always incorporate major department stores or supermarkets, but they do cater to people with cars. This aspect is particularly noteworthy in the case of the new mall in Kisarazu, which is the eastern terminus of the Aqua-Line bridge-and-tunnel route that connects Chiba’s Boso peninsula to Kanagawa Prefecture over Tokyo Bay. When this very expensive, 23-km highway was completed in 1997, one of its main purposes was to encourage visits to Kisarazu and the rest of Chiba by residents of Tokyo and Kanagawa, which includes the very large cities of Kawasaki and Yokohama.

That didn’t happen. Most of the traffic actually went the other way, if it went at all. When it opened, the toll was an intimidating ¥3,000 each way. As part of his election campaign platform, current governor Kensaku Morita promised to persuade the land ministry to reduce the toll, and now it’s only ¥800 one way (as a “test discount” that appears to be permanent), but still the tourists weren’t coming to Kisarazu. Instead, they went to the restaurant and retail complex built in the middle of the Aqua-Line. The Aqua-Line itself became the attraction, not the cities on either end of it.

Continue reading about shopping malls in Japan →

Consumption tax increase: Fairness is in the eye of the beholder

Monday, April 9th, 2012

The Japan Communist Party opposes the proposed consumption tax increase

Ever since Yoshihiko Noda became prime minister last summer he has been staking his political career on approval for an increase of the consumption tax as a means of bringing the national debt under control. In the process he needs to convince everyone that it is the fairest tax there is. His one-note tone of self-sacrifice is starting to make people wonder, though. Last year a majority of citizens said they’d go along with a tax increase, but lately that number has dropped significantly. On April 2, the Mainichi Shimbun published the results of a phone survey that found 60 percent of respondents opposed any increase, a 2 percentage point increase from a month earlier.

So is it fair? The research institute of Daiichi Life Insurance studied the matter and found that a household of four (married couple, two children) with an income of between ¥4 million and ¥5 million would pay out ¥60,000 more a year in consumption tax if the rate went up to 8 percent, which, according to Noda’s current proposal, would happen in 2014. Then, when a second boost pushes the rate to 10 percent in 2015, this household will pay out ¥100,000 more than it does now.

In principle, the more money you make, the more you consume and thus the more you pay. And this is true to a certain extent. Daiichi Research found that a family of four making ¥8 million a year will pay out about ¥90,000 more per year when the tax goes up to 8 percent, and ¥150,000 more when it increases to 10 percent. So the gap between the lower and higher income groups at 8 percent is ¥30,000 and the gap at 10 percent is ¥50,000.

However, where the change will really be felt is in terms of disposable income, since starting in 2013 income taxes will also increase in order to pay for reconstruction of the disaster-hit Tohoku region. Though there will be deductions and exclusions that can make each taxpayer’s situation different, Daiichi found that, compared to 2011, taking all these new taxes into consideration the household that makes less than ¥5 million a year will have ¥310,000 less disposable income a year when the 10 percent consumption tax kicks in in 2015. The ¥8 million household will have ¥410,000 less in disposable income. Though the richer household makes twice as much money, it loses only 5 percent in terms of disposable income with the increase, while the poorer household loses almost 8 percent in terms of disposable income.

The consumption tax covers everything consumed, including food and other necessities. Consequently, the burden weighs more heavily on lower income households than it does on richer ones, since basic essentials are assumed to be about the same for everyone regardless of income. That means there is less money to spend on non-essential items and, presumably, lower income households won’t. Retailers and other commercial enterprises will have to compete more aggressively for upper income customers because those at the other end of the spectrum won’t be making as many purchases in order to make ends meet.

Experience counts for something in JR embezzling incident

Tuesday, April 3rd, 2012

JR ticket office

On March 16, JR West pressed charges against a 50-year-old employee who allegedly embezzled ¥86 million. The unnamed worker, who was hired by the railway company in 1980, when it was still part of Japan National Railways (JNR), worked in the ticket office of Akashi Station on the JR Sanyo Line. He has been accused of printing out fake teiki (commuter passes) for which he gave out equally fake refunds that ended up in his pocket. All in all, he carried out this fraud 659 times and supposedly spent the money on gambling and other “entertainment” activities. But what’s more interesting is that he didn’t do it alone. He apparently enlisted the assistance of seven other staff members who confessed that they felt pressured into going along with the scheme because of the accused’s seniority.

The suspect first started the racket when he was working at Asagiri Station on the same line. He would issue fake passes and then dispense refunds for the passes after the imaginary customers who purchased them reported they were defective. Since these passes are issued by vending machines, the salesperson keeps the supposedly defective pass and refunds the money, which the customer uses to buy a new one. Under such circumstances the salesperson has to write a report for the refund and then later someone has to verify the refund report with the returned pass, but somehow the employee figured out that no one ever actually did this. In fact, he probably could have continued the scam indefinitely if another employee in JR Nishi Nihon who worked on the Takarazuka Line hadn’t been caught doing the same thing, thus causing management to look a little closer at records to see if it wasn’t more widespread. Apparently it was. Even before they caught the Akashi embezzler, investigators discovered an employee at Osaka Station who had pilfered ¥32 million.

But none of the other embezzlers used underlings to help them bring in more cash. A JR executive told reporters that the seven accomplices were contract workers in their 20s, meaning their employment was not guaranteed. When questioned about why they agreed to participate in the scam, they said the accused, who was their supervisor, made it impossible to refuse. They knew it was wrong, but believed that if they didn’t obey his orders they’d lose their jobs. After five years they are given the opportunity to become regular employees, but if they don’t they aren’t rehired, since contract workers are limited to four rehirings. One of the seven stopped working for JR before the incident came to light.

After JNR went private in 1987 and the company was split into several regional railways, many older workers were laid off. Some sued and are still fighting to get their jobs back, but in any case JR West didn’t hire many new graduates in the subsequent decade, which means there is a wide age gap in the company’s ranks. At Akashi Station, for instance, eight of the 41 employees are in their late 40s and 50s, while the rest are in their 20s. Most of these younger employees are contract workers who have to renew their employment every year. The hourly wage is about ¥1,000 (following a three-month probation period during which they earn ¥890 an hour). JR didn’t reveal what the accused employee’s salary was, but according to Nenshu Lab, a wage research group, the average salary for a full-time JR West employee, regular or not, is ¥6.73 million. In 2005, however, the average salary was ¥7.24 million, which would seem to indicate that more contract workers have been hired as older workers retire.

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