Wednesday, 23 January 2008

Petrol Tax

Here's an interesting demonstration of how things in Japan often follow a different logic from elsewhere.

In the oil shock years of the 70's, Japan imposed a temporary petrol tax to discourage excess consumption.

Subsequently, throughout the (almost) uninterrupted rule of the LDP, the ruling governments forgot to repeal the "temporary" tax despite the fall in oil prices. Not such a serious problem as not many people use their cars for work here. The daily commute is usually by train or bicycle for most people.

Suddenly, though, this month, the government, facing a situation similar to the oil shock- oil $100 a barrel, has decided to repeal the "temporary" tax. The stated reason is to ease the burden on consumers. Discouraging petrol consumption is, apparently, no longer a priority. And the Kyoto protocol?

For most people the tax reduction won't really make that much difference and it comes against the background of rumblings about the need to increase consumption tax, which will affect a broad swathe of consumers. Puzzling.

The real thrust of the reduction is to break up the "Road Gang". A group of politicians spend the tax on useless projects designed only to enrich themselves and their cronies.

Of course, there might be other motivations. There is a worrying decline in car ownership among younger people in Japan. Without going into the reasons for this, suffice it to say that the decline is real.

To some degree, the Japanese car industy's export strength stems from low-profit domestic sales which cover overhead. The profits are made outside Japan. If the domestic base decreases, this can only have a negative effect on export competitiveness. Perhaps the needs of Toyota and Honda are part of the reason for this initiative, rather than the the desire to ease the burden on the long-suffering consumer...

The next post will look at why car ownership is decreasing.

Monday, 14 January 2008

Will the Rat bring Wealth?

The Year of the Rat might sound negative to Western ears, but actually these furry charmers are supposed to bring wealth. They are admired for their industriousness among other traits.

There are mixed predictions for the Japanese economy this year, but "not bright" seems to be the consensus.

Having noted all the reasons for the gloomy predictions, let's focus on a couple of more optimistic points:

  1. There is the feeling of a New Deal in the air, with even the Keidanren saying higher wages would be good for re-kindling domestic demand.
  2. There appears to be a desire to re-enter the economy among those Freeters who chose not to join it through the traditional Salaryman route 10 years ago. An example is the transfer of ownership of convenience stores to their Freeter managers under franchise deals.
There is a push from both ends to get things moving domestically, which should help to counter the potentially negative influences from the global economy.

I leave it to Grumpy Old Pedant to expound on matters demographical should the whim seize him.

Wishing you success in 2008