Motohiro Kurosawa of Fri-tei, a breaded pork cutlet restaurant in Tokyo, has struggled to adjust to steps meant to ease the pain of the tax increase that kicked in yesterday.
The nationwide sales tax has risen to 10 percent from 8 percent, which Japanese Prime Minister Shinzo Abe hopes will support the fast-aging population and rein in the industrial world’s heaviest public debt burden, more than twice the size of Japan’s US$5 trillion economy.
However, some of the ways the government seeks to ease consumer pain, such as premium shopping vouchers, different tax rates and discounts for cashless payments, are creating burdens for businesses, Kurosawa and others said.
At Fri-tei, Kurosawa must handle two tax rates: 8 percent for take-out and 10 percent for eat-in.
“It’s wrong to set two tax rates. Life would be easier if it’s set uniformly,” Kurosawa told reporters ahead of the increase.
Kurosawa in June bought a new electronic cash register system to handle complex transactions, which cost ￥200,000 to ￥300,000 (US$1,845 to US$2,768).
“It’s quite an investment, considering our sales at ￥33 million a year,” Kurosawa said.
On top of the reduced tax rate, the government will offer for the next nine months points redeemable for discounts to shoppers who use cashless payments at small retailers.
The program, together with the reduced tax rate, are expected to spur a price competition among businesses that lack bargaining power with customers accustomed to decades of deflation.
The government has set aside ￥2 trillion for such stimulus.
Some major convenience store operators are already offering discounts for cashless payment. Other retailers are simply reducing prices to lure customers.
“This could spark stiff price competition and induce deflation. Small firms that lack competitiveness will be forced out of business,” Japan Supermarket Association chairman Yukio Kawano told reporters.
The Sukiya restaurant chain has kept the tax-included price of its regular gyudon bowl of rice topped with beef unchanged at ￥350, despite the higher 10 percent sales tax rate. McDonald’s Japan has also kept eat-in prices for about 70 percent of its menu unchanged.
That makes things easier for consumers, but squeezes profits, Kawano said.
A mid-size supermarket chain, Yaoko Co, has been preparing for the tax increase for a year, including getting new cash registers at a cost of ￥700 million. It also retrained employees, coordinated with 300 business partners and revised prices.
“Even sales clerks at our supermarkets are still confused on which items are subject to a lower tax rate,” Yaoko general manager of sales strategy Yukio Tanita said.
For example, sweet sake is considered alcohol and is taxed at 10 percent, but sweet sake flavoring is only taxed at 8 percent, he said.
Toothpaste is subject to the 10 percent tax rate, but breath-care tablets are taxed at 8 percent.
“Taking labor expenses into account, it costs a lot,” Tanita said. “It’s hard to secure manpower at a time of labor shortages.”
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