The record budget
Japan has approved the budget for the fiscal year of 2019 in January and it came out be JPY 101.46 trillion. This is the first time the budget goes over JPY 100 trillion, and it also is the biggest budget so far.
The reason it got that big is that 2019 budget includes the measures to balance out the upcoming consumption tax hike in Japan this fall. Japan foresees the drop in consumption because of the increased tax rates. To help consumers Japan introduces several measures to provide more incentives for people to spend their money.
Consumtion tax rate for take-out food will remain at 8%.
Consumption incentives
Firstly, the National Tax Agency suggests charging lower taxes on food sold outside stores. Thus, it would be cheaper to eat takeout food on the go or in the public spaces like parks benches. To be clear, one will have to dine at the tables and chairs that are not managed by any store.
The same goes for the non-alcoholic beverages and food bought at the movie theaters, stadiums, etc. Again, this food has to be consumed outside the establishment that sells it, otherwise the 10% tax will be applicable if you eat it inside the shop rather than in your seat.
The Tax Agency guidelines also explain how to calculate taxes when you buy eat-in and take-out items simultaneously. The important point here is that if you purchase a set (e.g. a meal at McDonalds) and consume at least one of the purchased items inside the store, your whole set of purchases will be charged at higher rates, regardless of where you plan to eat the rest. However, if you purchase items to be eaten in and taken out separately, than they will be charged at different tax rates of 10% and 8% accordingly. For those who are baffled by this new system, the government plans to hold public lectures across the country and explain these new tax measures.
Secondly, Japan plans to provide rebates on cashless purchases, which is an interesting move, provided how heavily cash-oriented Japan still is. Finally, the government plans to assist the low-income households with special shopping vouchers to alleviate the tax burden.
How will the consumption tax hike affect Japan?
A senior economist from Goldman Sachs Japan believes the consumption tax hike consequences will not be as harsh as those of 2014 due to the above-mentioned incentives, low inflation, and moderate oil prices. Moreover, he claims that cashless payments will be “an interesting social experiment” helping analyze consumer behavior. That is why he recommends to wait until October and use the benefits of the cashless payments to those who are planning to purchase something from small or medium businesses.
"Otsumami" - a bite size snack:
It might be a good idea to switch to cashless payments starting this October.
