Increased Consumption Tax Rate Causes Negative Growth
Is the Bad Economy the Result of Typhoons and a Warm Winter?

The Government Announces that “Economy as a Whole is on a Gradual Recovery Trend” but…(photo: Reuters/Aflo)




Negative Growth for the First Time in Five Quarters

Japan’s 2019 October to December GDP (Gross Domestic Product) decreased by 6.3 percent compared to last year, resulting in a negative growth for the first time in five quarters.




Are Typhoons and the Warmer Winter Its Cause?

Individual consumption that amounts to 60 percent of the GDP dropped by 2.9 percent. Furthermore, infrastructure investment that has been pulling domestic demands decreased by 3.7 percent, the first decrease in three quarters.

Yasutoshi Nishimura, Minister of State for Economic and Fiscal Policy, announced in a talk released on February 17th that the reason of the negative growth was the increase in demand that comes with a raise of the consumption tax rate, combined by the effects of the typhoon and the mild winter.

Bank of Japan’s CEO, Haruhiko Kuroda, also displayed his outlook on Japan’s negative growth as “primarily the result of the damages caused by the two typhoons. In Japan, the damage caused by natural disasters is definitely increasing.”


Outlook 1


The Government and the Bank of Japan Shifts Responsibility

A negative growth this large has not occurred since 2014 when the consumption tax rate was raised to 8 percent. It is clear that the economy falters as a result of a rise in consumption tax rates.

This time, the government implemented a reduced tax rate and threw in tax money to advance returns from cashless payment to subdue the effects of the tax raise, but this was unable to prevent the worsening of the economy.

The February 19th edition of The Financial Times stated, “The Abe administration immediately tries to put the blame on typhoons and warmer winter, but those explanations are nonsense.” Furthermore, they continued to point out the responsibilities of the Abe administration: “The economic recession is the direct and obvious result of the increased consumption tax rate from 8 to 10 percent in October.”


Outlook 2


Taiwan Makes an Opportunity Out of Adversities

Meanwhile, Taiwan’s 2019 October to December quarter increased by an annual rate of 6.96 percent.

The explanation behind this was the ability of the Tsai Ing-Wen administration to change the damaging U.S.-China trade war into their opportunity.

The pull factor in the Taiwanese economy is the IT field. Prior to this, the primary strategy was to sell electronics produced cheaply in China to large corporations in the U.S. Therefore, the trade war that limits exports from China to the U.S. should have been as huge a disaster for Taiwan as the typhoon in Japan.

However, the Tsai administration strategized to move its production base back into domestic locations and made policies relating to the procurement of land and hiring foreigners looser for returning corporations. Funds can be borrowed with low interest rates, and corporate tax was lowered as well.

As a result, many Taiwanese corporations holding factories in China invested a total sum of approximately 2.5 trillion yen (around $2.5 billion) into the nation. More and more factory construction is being undertaken all around Taiwan.

President Tsai has stated, “Taiwan is the beneficiary of the trade war.”


Actions to Take


Japan Should Look Upon Taiwan as an Example

Japan should learn from Taiwan and stop making excuses on its environment, instead turning it into a positive opportunity.

First, it is necessary that the 10 percent consumption tax rate be dropped to 5 percent. In addition, in order to avoid risk from China, regulations need to be loosened and tax rates decreased to bring production bases back into Japan.

The sluggish economy shouldn’t be blamed upon external environmental factors such as natural catastrophes or the spread of an epidemic. Instead, the government should reflect upon its mistakes, become humble, and take actions to improve the situation.

Maintaining Power After Retirement
The Evidence of Putin’s Responsibility

President Putin Declares Constitution Amendment in his January 15th Annual State of the Nation Address




Change in Constitution Announced

Russia’s President Putin is moving towards his 2024 post-retirement.

Mr. Putin, in his annual State of the Union address this January, announced his plan to amend the constitution. This is a plan to change the power hierarchy, including a proposal for the State Duma to take on the role of appointing the prime minister and the cabinet, and increasing the power of the presidential advisory board known as the State Council.

This proposal was met with criticism both domestically and overseas describing Putin as a dictator trying to hold on to his power even after his retirement.

Mr. Putin has recently been approaching China and its military, working towards a China-Russia Alliance. Last year, an Internet Regulation Law was enforced in Russia that limited freedom. The image of a dictatorship is further solidifying.




Maintaining World Order Through Multi-polarization

However, Mr. Putin can be looked at not just as a dictator, but as a politician who understands the meaning of power.

Mr. Putin has stated previously that “the breakup of the Soviet Union was the greatest geopolitical tragedy of the 20th century.” He is aiming towards the recovery of the Russian Orthodox Church as well as exhibiting considerable power as a religious nation.

This can be observed from his relationship with the U.S. Mr. Putin has been on the same footing with the U.S., as can be seen by how he criticized the impeachment prosecution against President Trump. Mr. Putin believes that a multipolar world with various nations such as Russia, Japan, and China balancing their powers to create world order is more ideal than a monopolar regime by the U.S.

His denunciation of the environmental activist Greta Thunberg comes from his stance that over-the-top global warming policies will destruct world economy and is similar to President Trump.

Mr. Putin’s holding continued influence over the Russian government as a result of his responsibility for world order will have certain meaning in itself.

Increased Consumption Tax Rate Causes Negative Growth
Copyright © IRH Press Co.Ltd. All Right Reserved.