Archive for the ‘News’ Category

Local municipalities vie for your ‘hometown tax’

Monday, August 11th, 2014

Screen shot of web portal site for products being offered as gifts in exchange for "hometown tax" donations

Screen shot of web portal site for products being offered as gifts in exchange for “hometown tax” donations

The ruling Liberal Democratic Party is already thinking about next year’s local government elections and in order to help their candidates is studying a possible increase in the maximum tax deduction afforded to people who contribute “hometown taxes” (furusato nozei), a system that was implemented in 2008 to help regional municipalities struggling with budget shortfalls.

Because an increasing portion of the population is concentrated in large metropolitan areas, local government tax bases are eroding. The hometown tax diverts some of the money people pay to big city governments to these smaller municipalities in the form of donations. In order to make the system attractive to taxpayers, the central government offered deductions not only for national income taxes, but also for local income taxes.

Taxpayers can donate funds to a local government that is different from the one where they live, and despite the name of the system it doesn’t have to be their hometown. It can be any locality. Say you live in Tokyo but you want to help out a town in Fukushima devastated in the disaster of 2011, something that many people have used the furusato nozei to do. If you donate 20,000 to that town in Fukushima through the hometown tax system you can get a deduction off your national tax bill this year, and since local income taxes are based on national income taxes, this deduction, as well as a separate deduction for charitable donations, is reflected in your local tax bill the following year, which will be lower that it would have been otherwise as a result. So for the ¥20,000 donation, the taxpayer ends up with an ¥18,000 tax savings (¥20,000 minus a ¥2,000 handling fee).

Obviously, small local governments like the system very much while larger city or prefectural governments, such as Tokyo’s, don’t, because they lose out on those diverted tax revenues. In 2013, according to the Ministry of Internal Affairs, 22,000 Tokyo taxpayers contributed hometown taxes to other municipalities and it cost the Tokyo Metropolitan Government ¥500 million. By Tokyo’s budget standards that’s a drop in the bucket, but if the LDP raises the maximum amount allowed for the deduction, it could go up significantly, and, it should be noted, almost no one from other municipalities donates money to the Tokyo Metropolitan Government.

But there’s another factor that may drain revenues from big city governments, and that’s competition for furusato nozei contributions. Last month, in line with the aforementioned 2015 local elections, Prime Minister Shinzo Abe visited Tottori Prefecture, which received the highest amount of hometown tax donations in 2013. What makes Tottori, one of the smallest prefectures in the country, so popular? Two answers: beer and crab. In fact, Abe, a teetotaler, made a point of dropping by a local craft brewery because the factory’s product is sent by the prefecture to donors as a thank-you gift. Or, if you donate a certain amount you can receive crab from the prefecture instead.

In this way, donors get multiple effectiveness from their donation: tax cuts (two, in fact) and a free gift that conceivably could be worth more than the donation. Local governments and businesses also receive multiple benefits: they get diverted tax revenues as well as valuable PR for their local products. Now, hundreds of local governments are competing for hometown tax donations with attractive gifts, even if the donations are only a few thousand yen. Consequently, the number of donors and the amounts donated are rising yearly.

According the Ministry of Internal Affairs, in 2009 33,000 people received the hometown tax deduction on their returns, accounting for ¥7.3 billion in donations. Last year the number of deductions was more than 106,000, comprising ¥13 billion in donations.

Tokyo Governor Yoichi Masuzoe has already weighed in on the proposed limit increase, saying that furusato nozei is a “gimmick” for trying to correct an imbalance in local finances but its real result will be to stifle economic progress. The Tokyo tax bureau has complained about the gift system, seemingly because it removes the altruistic component — giving because you care — from the idea of “donations,” and, sensitive to the charge, the Ministry of Internal Affairs has cautioned local governments to be more “responsible” in offering gifts in return for donations. But that may just be lip service. Abe’s support at the local level is supposedly deteriorating, so he needs to do something to bring it back up even a little bit.

A modest proposal for alleviating the endangerment of Japanese eels

Sunday, July 27th, 2014

Fish fans: People waiting in line at a popular eel restaurant near Minami Senju Station in Tokyo

Fish fans: People waiting in line at a popular eel restaurant near Minami Senju Station in Tokyo

This year, doyo no ushi no hi, the “day of the ox,” falls on July 29 in accordance with the old Chinese calendar. Counterintuitively, Japanese people don’t celebrate the day by eating beef but rather eel, because, supposedly, eel, or unagi, helps maintain a person’s stamina during the hottest days of summer. But it should be noted that the custom of eating eel is commercial in origin. According to legend, the tradition started in the 18th century in Hino, Western Tokyo, where nobody ate eel because the fish was a kind of local deity. An inventor named Hiraga Gennai came up with a publicity campaign to get people to eat unagi on doyo no ushi no hi because both ushi and unagi start with the “u” sound. The campaign worked, and now everybody eats unagi on doyo no ushi no hi. Well, maybe not everybody, but enough to drive Japanese eel to the brink of extinction.

Japanese eel for consumption are caught in the wild as fry and transported to eel farms throughout Asia. Eel is now on the International Union for Conservation of Nature‘s endangered red list, and so the environment ministry made the same designation on its list of at-risk species. However, this information has been tempered somewhat lately by media reports saying that the eel catch was higher this past year, thus driving the price of imported eel, mainly from China and Taiwan, down considerably. Consequently, eel dishes on the 29th may be cheaper in some places than they were last year.

Unagi fans will see this as good news, but it isn’t. The reason eel is on the endangered list is that Japanese people catch and eat too much of the fish, which wasn’t the case before the mid-1980s, when eel was considered something of a delicacy eaten only on special occasions. In other words, the cheaper the eel, the more likely eel stocks will be decimated.

Japan not only is the major consumer of Japanese eel, it is by far the major consumer of all eel: 70 percent of eel caught in the world is eaten by Japanese people. The speed at which Japan consumes eel has outpaced the species’ ability to reproduce itself. Japan first started buying eel overseas in 1980, mainly in Europe, but wild eel has been protected there since 2009 when it was declared endangered by the European Union.

Japan is trying to import more eel from Southeast Asia. Right now Japan itself produces 20,000 tons of unagi a year on farms, about half the amount at its peak in the late 90s. In 2000, Japan imported 130,000 tons from China and Taiwan. That amount dwindled to 32,000 tons by 2013, and yet eel prices in restaurants are still cheaper than they were in the 1980s. Why? Because so many restaurants serve eel. Before the bubble era, eel was only consumed in specialty restaurants and rarely at home. Now, even fast food chains serve eel; or, at least they do on doyo no ushi no hi.

And that may be where the problem lies. Last year, Osaka Gas conducted a survey asking consumers if they plan to eat unagi on ushi no hi, and 30 percent said they would. The biggest portion, 57 percent, said they hadn’t decided. Among those who said they definitely would not eat eel, one-third explained that eel was too expensive, another third said they don’t really like eel, and the rest said they’d eat it some other day. (A mere 2.6 percent said they wouldn’t eat eel because it’s endangered.)

While 30 percent doesn’t sound like a large portion, we’re talking about one day out of the year, a day when even people who don’t eat eel regularly feel the desire to eat eel, because the media makes a big deal out of it. The problem is that there are no statistics about eel consumption in Japan, only eel production, but we can assume that everything produced and imported is eaten here, since Japan doesn’t export eel. And as Minako Saito points out in her Tokyo Shimbun column, eel isn’t a hugely popular delicacy like fatty tuna (toro), it’s simply a “seasonal dish,” so if you divorce eel eating from doyo no ushi no hi, you may substantially be able to decrease the amount of eel that is consumed, because, according to government statistics, a relatively huge portion of eel is consumed on doyo no ushi no hi.

Like beef cattle, eel became the victim of an affluent society that thought everyone, and not just its well-off members, should have the right to eat it whenever they wanted. As we now know, the worldwide taste for beef has led to major environmental collapse, and Japan’s taste for eel has driven the species to the edge of extinction; except that Japan doesn’t really have a huge taste for unagi. It’s mostly PR-driven, so if you stop the PR and allow consumption to drop to a more rational level, the price will go up and unagi stocks should grow.

Does an increase in summer bonuses mean a healthier economy?

Saturday, June 21st, 2014

It’s that time of year again, the season when employers, both public and private, hand out their summer bonuses. In recent years the recession has kept the amounts down despite the fact that regular employees tend to consider them as an integral part of their annual salaries. In fact, society in general thinks that, as proven by the practice of incorporating bonuses into repayment schedules for home loans. Technically, however, bonuses are literally bonuses: Employers are not obliged to pay them, and actually use them as a kind of safety valve to adjust personnel expenditures twice a year.

Josei Jishin lists 35 of the  top 55 major corporations in terms of size of summer bonus for 35-year-old regular employees

Josei Jishin lists 55 major corporations in terms of size of summer bonus for 35-year-old regular employees

This summer the news sounds good. Bonuses are, on average, higher than they were last year, by about 8.8 percent, according to a survey of 74 companies carried out by Keidanren, Japan’s biggest business lobby. The average bonus for a 35-year-old regular worker will be ¥1.5 million, while that for a manager in his 40s or 50s is above ¥3 million. It’s the highest year-on-year increase on record.

According to Josei Jishin magazine, the biggest bonuses are being given out by trading companies, which makes sense. Trading companies, who do all their business overseas, enjoyed a huge windfall after the government’s monetary easing policy forced down the value of the yen.

Export-oriented manufacturers also did well for the same reason. Toyota’s average summer bonus for a 35-year-old employee is ¥1.23 million, though that sounds sort of stingy considering that the company saw a 73 percent rise in profits. Securities companies, which also benefited from Abenomics, were high on the list (Daiwa Shoken ¥1.35 million), but their employees’ compensations tend to be based more on personal accomplishments rather than corporate achievement, which is the classic definition of a bonus.

In 13th place on the Josei Jishin list is NTT DoCoMo, at ¥935,000, the highest company to record a drop in average bonus pay compared to last year. In fact, only two companies on the list of 55 companies announced a decrease.

What’s notable about the list is that all the companies are big. Smaller firms, it should be noted, aren’t doing as well in the recovery, and while average bonuses have gone up, the actual number of bonuses given out has gone down, from 38.6 million in 2013 to a projected 37.4 million this year.

Economist Hiroko Ogiwara pointed out to the magazine that while automobile makers did really well, their suppliers barely kept up and so didn’t give out much in the way of bonuses. NTT didn’t do as well as last year because it has no export-related business. And domestic companies that rely on imports, like processed food manufacturers, have suffered due to higher costs for ingredients. Moreover, the labor shortage in the retail and service industries pushed up personnel costs. Sukiya, the largest gyudon (beef bowl) chain in Japan, could only afford an average ¥350,000 to its regular employees (meaning not to restaurant staff). Power companies also were cheap with bonuses because of their continuing reliance on imported fuel. Kyushu Power’s average was only ¥300,000.

CONTINUE READING about summer bonuses →

The new National Stadium will have to rock you

Sunday, June 8th, 2014

The show must go on: Attendees of a sayonara event at the National Stadium snap photos of an air show held on June 6.

The show must go on: Attendees of a sayonara event at the National Stadium snap photos of an air show held on June 4. KYODO

The old National Olympic Stadium in Tokyo closed down at the end of May with a big sendoff: two days of star-packed concerts in front of a capacity crowd. As everyone knows, the venue is being torn down to make way for an even bigger structure for the 2020 Tokyo Olympics, an endeavor that continues to court controversy due to its projected size and cost, not to mention what it will likely do to the neighborhood around it.

Originally, the estimate for the new stadium was ¥300 billion, but mysteriously this figure was decreased to ¥169 billion just prior to the final bid. According to Professor Tomoyuki Suzuki, who was in charge of preparing Tokyo’s unsuccessful bid for the 2016 Games, construction costs for public facilities always end up rising over time, but neither the 2020 Tokyo bid organization nor the Japan Olympic Committee has ever explained that bit of conventional wisdom to the public. He told Tokyo Shimbun last April that the estimate was simply based on a number “that was most likely to be accepted.”

There is also the question of what to do with the stadium after the Olympics. The JOC is predicting that it will show a surplus of ¥400 million a year, but as Suzuki points out, this projection is based on the premise that the stadium will host 12 major pop concerts a year, and that, he believes, is impossible, unless the stadium foregoes sporting events, which is what it’s being built for in the first place.

The main problem with using stadiums for concerts, especially stadiums that hold field events like soccer, is that the playing surfaces are used for seating, which has a tendency to destroy the grass. Suzuki cites Ajinomoto Stadium in Western Tokyo, which is the home field of the FC Tokyo soccer team. In 2008, the stadium operators rented the facility to a promoter who held a rock concert attended by almost 80,000 people. Despite FC Tokyo’s protests, the concert went ahead, and afterwards the stadium had to spend “tens of millions of yen” to change the grass on the entire field in time for an FC Tokyo match.

CONTINUE READING about stadium rock to come →

Australian EPA: Let them eat beef (but not cheese)

Monday, April 14th, 2014

Stuck in the middle: Australian cheese competing in the dairy case with New Zealand and Switzerland

Stuck in the middle: Australia cheese competing in the dairy case with New Zealand and Switzerland

Though its participation in the Trans-Pacific Partnership seems to be dead in the water for the time being, last week Japan signed an Economic Partnership Agreement (EPA) with Australia that could revive Japan’s TPP hopes, but before we get to who lost and who won in the Australian deal, let’s talk about cheese.

Personally, we were looking forward to some sort or tariff reduction on Aussie cheese, not because we prefer Aussie cheese over other kinds, but because all so-called natural cheese — meaning not processed — is expensive in Japan owing to the dairy farmers lobby and their demand for high tariffs on imported milk products.

Japan is close to an EPA with the European Union, but the cheese tariff will likely remain. The Australian EPA only addresses natural cheese that is exported to Japan for purposes of being blended with other ingredients to make processed cheese. The tariff on such cheeses will be reduced from 40 to 0 percent over time, but the tariff on natural cheese that is sold to the public in stores will remain at 29.8 percent, so no cheap cheddar right away.

CONTINUE READING about Japan's EPA with Australia →

Call the sitter: Parents resort to online services out of economic necessity

Monday, March 31st, 2014

Public daycare center closed for the day

Public daycare center closed for the day

A few weeks ago news outlets were all over a story about the death of an infant who had been placed in the care of a young freelance babysitter. The media was quick to blame the mother, at least by implication, since she had found the man through an Internet portal site that matched people who needed babysitters with people who provided such services. Many of these providers seem to be unlicensed, but babysitting as a job description is relatively new to Japan.

What seemed unusual in this case — though it’s actually quite common — is that the two boys the mother left with the man were watched at the man’s apartment in Saitama Prefecture, rather than at the woman’s residence in Yokohama, which is normally the way babysitting works. In the woman’s defense, some media pointed out that she had used the man as a babysitter previously and didn’t trust him, but because he used a different name this time she wasn’t aware she was leaving her children in his care.

However irresponsible the woman was in this situation, the fact is that there is an increasing number of parents who rely on such services. The Internet portal site that the woman used has 10,000 registered users and 6,000 registered sitters. The paucity of daycare services in Japan is a well-covered issue, and some parents can’t wait for the government or the private sector to rectify the situation, especially if they have infants and toddlers, which conventional daycare centers don’t usually accept anyway.

CONTINUE READING about childcare portal sites →

Government’s new scheme to bolster social security is still hopeless

Monday, March 10th, 2014

This document was sent out several years ago after the government discovered that it had lost the pension payment records of 50 million people. The document would be used to help locate those records. The program was expensive, but very few people responded.

This document was sent out several years ago after the government discovered that it had lost the pension payment records of 50 million people. The document would be used to help locate those records. The program was expensive, but very few people responded.

The Ministry of Health, Labor and Welfare has announced that starting in April it will “take action” to increase the “collection rate” of national pension premiums, specifically those for kokumin nenkin, the obligatory pension plan for the self-employed and those who otherwise don’t belong to the company-supported kosei nenkin pension system. According to Tokyo Shimbun the idea is to send warning letters to individuals whose incomes are more than ¥4 million and who haven’t contributed for at least 13 consecutive months.

Presumably, the next step will be for the ministry to start siezing assets. The initial criteria would target approximately 140,000 pension scofflaws. Eventually, however, they will go after everyone who hasn’t paid, and since it is estimated that close to 3 million people who should be paying into the system haven’t been for at least 24 months, the job seems daunting if not impossible.

There are many reasons for this delinquency, but the main one has to do with the system itself. Basic pensions apply not only to the self-employed, but anyone who is employed part-time or on a contract basis, meaning their employers don’t pay into the kosei nenkin system. It also includes the unemployed, because according to the law every adult who lives in Japan must belong to the system, whether they work or not. And the premiums are the same, regardless of income or lack thereof: right now ¥15,250 a month (it goes up gradually every year).

The ministry assumes that about 90,000 people who should be “members” are not, and that number is probably higher, but in any case, excluding those who are exempt from paying (very poor, disabled, etc.), the rate of payment into the kokumin nenkin fund was only 59 percent as of 2012, and that portion continues to decline.

In a 2011 government survey, the number one demographic of delinquents was the unemployed, which is easy to understand. However, 28 percent of delinquent payers had part-time jobs, and they said they didn’t make enough to pay. Moreover, 22 percent of the so-called deadbeats were self-employed or working in their families’ businesses. Overall, 74 percent of those who said they couldn’t pay gave their reason as “can’t afford the premiums.” The percentage is increasing because the number of non-regular employees is also increasing.

But the government says that 10.5 percent of households whose income exceeds ¥10 million have also failed to pay their fair share, and it’s these people they are citing first. After that, 17 percent of households with incomes of between ¥5 and ¥10 million are delinquent. Both of these seemingly solvent income brackets say in surveys that they, too, cannot afford the premiums due to “financial difficulties,” but there is also a considerable number who refuse to pay simply because they “don’t trust the system.”

The pension system’s fairness has always been a point of contention. As it stands, if a person pays his fair share for 40 years, the maximum monthly payment he receives at 65 will be ¥66,000, which is not enough to live off of. The main concept behind kokumin nenkin when it was first devised was that the self-employed would still have income from their businesses or the sale of their businesses when they retired. Not only is that not necessarily true, but the bulk of basic pension members are non-regular employees who have nothing else to fall back on when they retire, unless they’ve saved and invested, which is unlikely.

Also, everyone in Japan must also pay into the national health insurance plan, which for most people takes priority since anyone can get sick at any time, but you only retire when you get old. Then there are people with some money who have bought life insurance annuity plans that give them some income when they retire. They may not see the point in paying double for a pension, so they don’t bother paying nenkin.

But the most discouraging aspect of the system is that in order to receive even the minimum payment at retirement, which is less than ¥30,000 a month, you have to pay into the system for at least 25 years. Regardless of one’s mathematical skills, it doesn’t take much calculating to understand that paying ¥15,000 a month for 25 years for a pension that will be so low one will have to apply for supplemental welfare (which is increasingly the case) is not worth it.

What’s particularly maddening about the government’s refusal to acknowledge reality is that it continues to throw money at the problem. Tokyo Shimbun estimates that for every ¥100 that the ministry will collect with its new hardline policy starting in April, it will spend ¥90. In real terms, the ministry has budgeted ¥5.3 billion for “forced collections.” Also, according to the law, it can only make delinquents pay up to two years retroactively, and if the individual has been delinquent for much longer than that the individual may wonder, “What’s the point?,” since he can only receive a pension if he’s paid for a full 25 years.

There is no sense to the system, especially when you consider that the Democratic Party of Japan wanted to change it to something more rational, and made the Liberal Democratic Party promise to revise the system when it gave up the reins of government in December 2012. Since then the LDP has done nothing, because it believes that any change would be unfair to the people who have paid into the system properly all along. Famous last words.

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