#worldcup

Japanese consumer confidence waning as consumption tax hike starts tomorrow

Japan consumer confidence.png

As the 10% consumption tax rate kicks in from October 1 in Japan from the current 8%, it is worth reflecting on the sorry state of consumer confidence. We are back below 2014 levels. While the sales of Japanese rugby jerseys and huge consumption of beer by gaijin at the Rugby World Cup may provide a brief respite, the trend remains distinctly negative.

Note that consumption tax has been the biggest portion of government revenue since 2014 and is on track to be 37% of the total in 2019, followed by individuals and the lazy corporate sector. Japan’s small-medium enterprises (SMEs) are the backbone of employment, comprising 70% of the labour force and 97% of all corporations. Yet 70% of SMEs pay no tax at all.

From an individual level, the top 0.7% of earners in Japan pay 30% of the tax bill, up from 20% in 1974. The bottom 50% have seen their tax contribution fall from 10% to around 2.8%. The top 8% pay around three-quarters of the total.

With Japan running a ¥100 trillion (US$1tn) national budget, the Ministry of Finance needs to sell ¥40 trillion (US$400bn) every year to plug the budget deficit.  The hope is that the consumption tax will lower the dependence on having to debt finance to such extremes.

Democrats doing what Democrats do best

So the Democrats are proposing a bill to pull federal funding for the 2026 World Cup if the US Soccer Federation (USSF) doesn’t fix the gender pay gap between the men’s and women’s teams.

Surely in a country that dominates the world in inflated sports contracts based on performance that these politicians might be on top of the idea that it is driven by the market, not by socialism and equality. The superstars in sports on balance have the edge that many of us do not possess.

If the women’s team was paid more than the men’s team, would Manchin seek to redress the inequality back the other way? Here is betting he wouldn’t say a word. CM has always argued women should be paid more than men should the economics support it.

When it comes to soccer the women’s World Cup generated $131m in revenues vs the men’s World Cup at $6bn. There is a reason for that. If sponsors see that the women’s game is such a great opportunity to market then they’ll flock without the need for legislation.