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Editorial: Inflating stimulus package blurs reason for consumption tax hike

The government is accelerating its efforts to devise programs to shore up the economy after the planned consumption tax increase in October next year from the current 8 percent to 10 percent. Prime Minister Shinzo Abe told the Diet in his policy speech last week that he will implement "all possible policy measures," emphasizing the stimulus package will be substantial.

Paying attention to the economy is necessary. However, the purpose of the tax hike is to secure funds to pay for ballooning social security spending amid the aging of the population, and to stop sending the bills to future generations.

The premier has already decided to spend half of the revenue from the tax rise on free education programs and other purposes. Inflating the stimulus package further will only blur the purpose of the raise.

One of the problematic ideas in this regard is to give points to consumers who make cashless payments using credit cards and other means. The program would cover merchandises sold by small- and medium-sized retailers, including food items exempt from the tax hike. As the points given to the customer would be 2 percent of the purchase price, food items would actually see a tax cut to 6 percent. So what is the point of raising the consumption tax?

The plan also includes encouraging a cut in the service fee retailers have to pay to credit card settlement service providers. This arrangement is apparently intended to spread cashless transactions in regional areas and increase the allocation of purchase points.

But deciding the service fee should be in the hands of service providers, based on a variety of factors including the sale amounts of retailers using credit card services. Intervening in the managerial decisions of corporations to support the economy does not make sense.

The government also intends to expand cashless transactions, often used by foreign tourists in Japan, to stimulate tourism spending. But the measure is completely different from an economic stimulus package, and putting the two in the same box would only cause confusion.

Another proposal of concern is to issue special gift certificates that allow low-income consumers to buy more items than the value of the vouchers. They were issued after the previous consumption tax hike in 2014, but created little tangible effects. Does the government intend to repeat inefficient fiscal stimulus programs?

In his policy speech, the prime minister urged "the creation of a proud Japan for our children and grandchildren by tackling the birthrate drop and aging society head-on." Abe is the one responsible for rebuilding the nation's finances, which are saddled with debts exceeding 1,000 trillion yen, and stopping postponing debt payments.

The current extraordinary session of the Diet is the first meeting of the national assembly since the premier announced in a Cabinet meeting to raise the consumption tax as planned next year. In his policy speech on the opening day of the session, Abe should have explained in detail why the hike is necessary, and sought the understanding of the general public, but he didn't. He should make such an explanation during the upcoming question and answer sessions of the Diet.

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