Dmitry STRELTSOV, Doctor of Historical Sciences, MGIMO University, Russian Foreign Ministry

Keywords: Japan, global financial crisis, Abe's cabinet, "abenomics", consumer tax

"Integrated tax and social security reform" has become one of the central issues on the Cabinet's agenda. Noda, who came to power in August 2011. E. Government project Noda was published on January 6, 2012.

TAX INCREASE TO SAVE SOCIAL PROGRAMS

The special feature of the Government's approach to the reform was that measures to stabilize financial sources for social needs should be closely linked to the policy of radical improvement of public finances. In accordance with this draft, the consumer tax rate was planned to be increased to 8% in April 2014 and 10% in October 2015. Additional funds received from the introduction of new rates (about 13.5 trillion yen per year)were received.¹ was proposed to be used specifically for the needs of social policy, and above all for financing basic pensions under the "national pension system". At the same time, the draft law of the Democratic Party of Japan (DPJ) provided for the right of the Government to suspend the increase in tax rates in the event of a favorable economic situation in the country at the time of their introduction.

The government bill also provided for other measures to tighten the tax burden. Thus, the project was supposed to increase from January 2015 the maximum income tax rates for individuals with high incomes (over 50 million yen per year) from 40 to 45%, increase from January 2015 the tax on income from the sale of securities and receiving dividends from the current 10% to 20%, slightly increase the inheritance tax and reduce tax benefits when they are paid. Many of the measures proposed in the draft law were of a recommendatory nature - for example, to take steps aimed at easing the situation of people with low incomes in the areas of taxation, healthcare and patronage care, to consider legal grounds for ensuring access for non-permanent employees of enterprises to corporate pension schemes, etc. It was also envisaged to slightly reduce the maximum pension for people with high-income individuals, expand state subsidies for low-income individuals, ensure greater equality of access to the public social security system, regardless of material well-being, etc.² At the same time, the Government set the goal of reducing the primary deficit of public finances by half by 2015 and ensuring the primary balance of the state budget by 2020.

At the end of February 2012, the Noda Cabinet published proposals concerning the pension reform. The Democrats proposed to unify the three pension schemes operating in the country within the framework of a single pension system. It was assumed that the budget funds from the consumer tax will be used to subsidize only the basic pension, which should amount to at least 70 thousand yen per month.

In contrast, the reform proposals of the Liberal Democratic Party (LDP) and the Komeito Party suggested a slight modification of the current pension systems in order to adapt them to the tightening financing conditions associated with the aging of the population. The opposition's projects did not provide for a radical change in the current system of independent pension schemes.

Despite the differences in positions, the DPJ managed to reach an agreement with its political rivals on ways to implement tax reform. In June 2012, between the DPJ, LDP and Komeito, representing so-

Ending. For the beginning, see: Asia and Africa Today, 2014, No. 3.

The three largest parliamentary factions formed, a package agreement was reached to support the bill, and in August of the same year it was passed by both houses of Parliament.

The draft integrated reform proposed by the DPJ Government defined only its general direction, while the details of its content, including specific issues related to the schemes of operation of new social security systems, were to be developed separately within the framework of a special advisory body - the "People's Council for Social Security Reform". Within one year of the adoption of the draft law, this body, which mainly includes representatives of the expert community, should hold a discussion on further ways of reform and submit its recommendations.

A lively discussion broke out in the country. Many critics of the new law pointed out that it is too abstract and declarative, as well as inaccuracies in calculations, which in practice will not allow to fully realize the potential laid down in the law. Prof. Chuo University's M. Katagiri, for example, pointed out that the proposed increase in tax rates to 10% would clearly not be enough to reduce the primary balance deficit by half by 2015, so these rates should be raised at least to the level of 15-17%. According to this expert, many provisions of the law require additional explanations: why it is necessary to raise the tax rate to 10% in October 2015, who exactly is considered "low-paid" within the category of beneficiaries of tax benefits, how to ensure the confidentiality of personal information when introducing individual social security numbers, why the increase in income tax and income tax rates is necessary. inheritances mainly apply to individuals with incomes over 50 million yen, who make up only 0.1% of the population in Japan, and so on. ³

In general, the possibility of combining the goals of sustainable economic growth, strengthening public finances and building a viable social security system in a single course is highly questionable. Raising the consumer tax seems natural as a means of solving social security problems. But will integrated reform strengthen the financial system and provide an incentive for economic growth? Logically, an increase in the tax burden on the population, on the contrary, will be a factor in reducing domestic demand, which will inevitably affect the pace of economic development. In any case, it is clear that solving such diverse and contradictory tasks will require non-standard solutions in the future.

TAX INCREASE IS A THREAT TO ECONOMIC GROWTH

The issue of raising the consumer tax has been raised with renewed vigor by the Abe government, which has to take into account the risks associated with the inevitable weakening of consumer demand when raising tax rates. Many people fear that a high consumer tax may slow down the market situation and hit the prospects for economic growth, i.e., negate all efforts to implement "abenomics".

Discussions on tax reform continued actively throughout the first half of 2013. Contrary to earlier statements, the Government did not announce its plans in this regard until the summer of 2013. The ruling Liberal Democratic Party did not indicate its position on the issue of raising the consumer tax in the election program for the elections to the House of Councillors. It was only at the G20 Finance Ministers ' meeting in Moscow in July 2013 that Japanese Finance Minister Taro Aso announced that the tax increase would be implemented as planned.⁴

However, the soon-to-be released quarterly economic statistics showing a slowdown in economic growth gave additional arguments to skeptics who advocate a more moderate pace of tax reform. (In the second quarter of 2013, economic growth was 2.6% year - on-year, significantly less than in the first quarter with its ^3.8% annual5.) For example, T. Nagahama, a leading economist at the Daiichi Seimei Research Institute, noted that raising tax rates by 3% at once will lead to an additional burden on the population in the amount of 8 trillion yen, and concluded that implementing the reform unchanged will" hurt too much " for the Japanese economy.⁶ Against this background, the adviser to the Cabinet of Ministers and. Honda suggested delaying the tax increase or increasing it gradually, raising it by ¹% each year7.

RISKS AND SOCIAL COSTS OF ABENOMICS

Meanwhile, the Abe cabinet's policy of "abenomics" carries serious macroeconomic risks. Thus, many people doubt the ability of the financial authorities to implement a policy of "controlled inflation", preventing its avalanche growth. The main risk is that if the Bank of Japan does not keep up with the rate of inflation, it will inevitably lead to an increase in refinancing rates, which, in turn, will multiply the government's spending on servicing public debt.

In addition, the devaluation of the yen and, consequently, the rise in the cost of imports, such as energy, led to the fact that Japan for the first time in several decades faced the problem of a foreign trade deficit, which amounted to a record amount of 880 billion yen ⁱⁿ April 2013.8 Expensive imports hit both consumers ' pockets and the interests of the corporate sector, especially small and medium-sized enterprises, which have much less adaptability resources than large corporations. According to the Chairman of the Japanese Chamber of Commerce and Industry, as a result of the rapid devaluation of the yen, about 80% of small and medium-sized enterprises "will face difficult challenges"⁹.

There are also quite acute problems associated with nekonku-

rentability of certain sectors of the economy. And this is not just about agriculture, although this is probably the most striking example. The medical services sector is extremely closed and therefore uncompetitive. For example, the government has not decided to allow the so-called mixed service of the population, in which the patient has the right to simultaneously use non-commercial and purely commercial insurance services when visiting a doctor.

At the same time, "rooted interests" are guided by an influential political lobby represented by "deputies-specialists" (members of clan groups), who traditionally do not allow radical decisions that break the existing status quo. It is their resistance that prevents the political leadership from exercising political will and making painful decisions in the national interest that infringe on the particularistic interests of individual corporations. The Government's ability to create a flexible and highly adaptive labor market in the future is also highly questionable, given the lack of labor and the Government's unwillingness to open the country to immigration. Thus, at the moment, it is still unclear whether Abe will be able to muster the political courage to overcome the restrictions that have hindered the decision-making process in Japan.

The most acute problem for the new LDP cabinet is the development of an effective course in the field of social policy. Against the background of the worsening demographic problem, the share of allocations for social needs is steadily growing, amounting to more than 30% of the total expenditure part of the state budget in fiscal 2013.

Judging by Abe's statements, the LDP government that came to power intends to solve its problems with an emphasis on the values of market fundamentalism. In his keynote speech to Parliament on February 28, 2013, the Japanese Prime Minister stated that "deregulation reforms will not leave any sacred cows" and that he intends to "one by one remove any obstacles to the activities of enterprises".¹⁰. Attention is drawn to the fact that the new leadership links the need for mutual assistance and State protection of socially vulnerable segments of society with the traditional approach based on "self-help" and "self-reliance". The head of Government designated "self-help" as an important priority of social policy and only after that declared the need for state assistance to the weak.

Meanwhile, the Abe cabinet's emphasis on using the principles of market fundamentalism poses a significant problem in terms of social policy. The gradual shift away from protectionism and human resource management, which implies that people are seen as the competitive wealth of a firm that needs to be developed along with other resources, creates a situation where corporate social guarantees are becoming less effective. In these circumstances, the process of deepening social contrasts and further erosion of the "middle class" seems likely to continue in the future.

It should also be taken into account that inflation and rising prices will inevitably hit just the "middle class". Despite all the authorities ' admonitions, corporations are unlikely to increase wages in proportion to the rate of inflation, shifting all the burden of restructuring to their employees. The experience of the 1990s-2000s showed that the restructuring of the corporate sector was mainly due to the optimization of hiring - an increase in the share of non-permanent employees, whose share in the overall hiring structure was more than 30%.

There are strong doubts that the State's economic incentive policy will lead to an improvement in the situation of employees. As the Mainiti newspaper noted,"it remains to be seen whether the stimulus package will ensure wage growth and job creation." ¹¹

The growing gap in the status of permanent and non-permanent employees is also a cause for concern. At the same time, it will be of particular importance that measures to combat deflation will affect not only temporarily, but also permanently employed, since, as practice shows, corporations tend to solve financial management problems, for example, by freezing wages. Against the background of inflation, this will inevitably lead to a deterioration in their financial situation.

Another negative aspect, from the point of view of social stability, is the inevitable increase in prices for imported products associated with the depreciation of the yen. Since Japan's dependence on imports of basic consumer products is quite large, "abenomics" has already led to an increase in the cost of such everyday items as gasoline, toilet paper, vegetable oil, etc.

Attempts to achieve a stimulating effect by investing in public works also do not meet the needs of the time. The Japanese economy has already passed a period of extensive development, and there are practically no infrastructure projects that would justify themselves from the standpoint of economic efficiency. In addition, the construction sector, which was once the main recipient of these investments, has significantly declined after Koizumi's "structural reforms" and does not have the capacity to fully utilize these funds - there simply is not the appropriate capacity for this, and the proper number of jobs.

Reasonable doubts about the government's calculations are also expressed regarding the policy of targeted incentives for certain industries. DPJ governments have already implemented similar policies, in particular with regard to "green energy", social welfare, etc., but they have not led to a significant macroeconomic effect. In fact, the government has adopted an old recipe, borrowed from the 1960s, when economic growth in Japan was extensive and focused on the development of backward areas. On the fact that massive public investment does not

They can be considered a panacea, the same experience of the DPJ's stay in power shows : over the past two years, "public works" have been growing, and the economy has continued to stand still.

FIRST RESULTS

The policy of "quantitative easing" and financial expansion, which was actively pursued throughout 2013 - pumping budget money into the economy-to a certain extent justified itself. These two "arrows" seem to have started to have a real positive effect.

For example, in December 2013, the word "deflation" disappeared from the monthly government reports on the state of the national economy for the first time in more than four years. This was mainly due to the rise in the cost of imports, which occurred against the background of increased dependence on external energy supplies after Fukushima, but it would be unfair to completely ignore the government's efforts. Fiscal and financial indicators also improved slightly: the primary balance of public finances (the ratio of state budget revenues to expenditures excluding borrowing) was reduced to a deficit of 18 trillion ^yen in fiscal 2013, which is 5.2 trillion yen less than in fiscal 2012.12 The economy began to recover, with increased investment in equipment and equipment. consumer demand increased moderately. The Nikkei index of the Japanese stock exchange after a long break broke the mark of 16 thousand yen per share, and the yen fell to more than 100 yen per dollar.

Is it possible to assess the results of the first year of abenomics as positive?

It is too early to draw unambiguous conclusions: in the economic environment of the beginning of 2014, subjective factors are still strong, namely, the continuation of the effect of expectations, as well as (if we are talking about consumer demand) the effect of the so-called "last-minute demand", when consumers rush to make purchases, using the favorable moment before the consumer tax increase in April 2014 city of

The most controversial assessment is the question of the possibility of further stimulating the economy mainly through monetary and investment policy tools. The main question is, will domestic consumer demand maintain enough momentum to pull the entire Japanese economy? The government expects that the activity of the population will be stimulated by inflationary expectations even after the increase in the consumer tax. However, skeptics point out that consumption in Japan is extremely restrained and the population is very inclined to save money. In addition, most corporations, despite all the calls of the government, did not dare to raise wages, putting this issue off until the" spring offensive " of the trade unions in 2014.

The problem of unbalanced public finances remains a headache for the Government. Despite some improvement, the overall situation remains extremely difficult, mainly due to the authorities ' policy of financial expansion. For example, in the fiscal 2014 budget, government spending will exceed a record 100 trillion yen. Spending will increase in almost all areas, including the social sphere (more than 30 trillion yen), the agricultural sector, national defense, education, construction, etc. On New Year's Eve, an additional budget for fiscal year 2013 was approved for an astronomical amount of 5.5 trillion yen, the vast majority of which will go to public works. As in the "good old days" of the LDP's monopoly rule, Tokyo was flooded with lobbyists from all regions of Japan in the run-up to the new budget. In order to plug the budget hole, the government has followed the proven path of massive issuance of new debt obligations, the total share of which in the revenue side of the 2014 fiscal year budget will be a record 40%.

Against this background, many people wonder how justified is the increase in the consumer tax from a moral and ethical point of view? Does the government have the moral right to impose taxes on citizens, even though its entire economic policy is aimed at rampant spending, much of which is directly associated with undermining financial discipline? It is estimated that almost all of the new revenue generated by the new tax rate (about 7.5 trillion yen) will be eaten up by interest payments on snowballing debts, which have been particularly high over the past few years.

Finally, the situation with the "third arrow" is still extremely difficult, namely, with the structural reform of the economy, the Abe cabinet has not yet made any real progress. The main question here is whether the Government will be able to end the over-regulated economy that makes it difficult for newcomers to enter the markets, especially in the areas of hiring, education, agriculture, health care and nursing. Will Abe risk encroaching on "deep-rooted interests", i.e. the preferential rights of those economic entities that actually monopolized their position in certain sectors of the economy?

In this regard, it is crucial to determine the direction of the "new growth strategy", which the government should determine in the summer of 2014. So far, according to the IMF, Japan's GDP growth in 2013 was 1.7%, in 2014 it is also projected at 1.7%, and in 2015 it may decline to 1.0%¹³.

¹ The Japan Times. 1.03.2012.

² Asahi shimbun. 7.01.2012.

³ Yomiuri shimbun. 23.01.2012.

⁴ Ibid. 23.07.2013.

⁵ Ibid. 13.08.2013.

⁶ http://www3.nhk.or.jp/news/web to-kushu/2013_0812.html

⁷ http://www3.nhk.or.jp/ncws/html/ 20130818/kl0013850331000.html

⁸ The Japan Times. 25.05.2013.

⁹ Ibidem.

¹⁰ Ibid., 2.03.2013.

¹¹ Mainiti Shimbun. 28.06.2013.

¹² Ibid. 26.12.2013.

¹³ Table 1. Overview of the World Economic Outlook Projections // Is the Tide Rising? WEO Update, January 2014, p. 2. International Monetary Fund http://www.imf.org/external/pubs/ft/weo/20 14/update/01/pdf/0114.pdf

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