print PRINT


Editorial: Wealth distribution, decarbonization obscured in Japan’s FY2022 tax reform plan

  • December 13, 2021
  • , The Mainichi
  • English Press

Japan’s ruling coalition has greenlighted a tax reform plan for fiscal 2022, the first revision under Prime Minister Fumio Kishida’s government.


Kishida has advocated a “new capitalism” doctrine. In formulating the tax reform plan, it had been called into question how far it would incorporate enhancement of redistribution of wealth and a transition toward a carbon-free society — major goals touted under the doctrine.


And yet, while those measures are indispensable for painting a future vision for the Japanese economy, the path toward realizing those goals has been obscured. The finalized plan went no further than bolstering tax incentives for companies that raise wages, among other measures.


Under the plan, the amount of the tax breaks will be higher the more proactively companies push forward with wage hikes, but businesses that can capitalize on such incentives will be limited primarily to ones with a solid performance. Such an initiative could result in widening the wage gap between businesses with strong earnings and those that are struggling. As the measure is limited to two years, it is unlikely it would lead to sustainable pay hikes.


Meanwhile, expanding the financial income tax, which is expected to play a more crucial role in achieving the wealth redistribution policy, was put off. As the capital gains tax is set at a uniform 20%, far below the maximum 45% rate for the payroll tax, it is said that the current system favors the affluent holding a large number of shares.


The coronavirus pandemic has brought the serious economic gap into sharp relief. The Japanese government has hammered out a cash handout plan for households with children and others, but an interim support measure will not solve the problem.


In order to drastically rectify the economic disparities, the government needs to secure solid financial resources and continue distribution. It is reasonable to ask the wealthy population to share the burden as they are reaping the benefits from high stock prices. Though Prime Minister Kishida had initially been eager to raise the capital gains tax, he subsequently shelved the move.


The latest tax reform plan also forwent the full-swing introduction of a carbon tax, levied on companies in proportion to their greenhouse gas emissions.


In contrast to Europe where aggressive global warming countermeasures are in place, Japan’s environment tax rate is extremely low. The government has set a goal of reducing Japan’s greenhouse gas emissions in fiscal 2030 by half compared to its fiscal 2013 levels. As there is not much time left for achieving the objective, it is imperative to lay out a drastic policy measure and secure the necessary funds.


Opponents to the full introduction of a carbon tax insist that it will increase corporate burdens and inhibit Japan’s economic growth. However, if the revenue from the carbon tax is funneled into technological development for decarbonation, it can be expected to spur growth. Many countries in Europe have managed to balance between the carbon tax on businesses and the economy.


It is essential to secure financial resources to move forward with the nation’s fundamental policy plans. If Japan is to continue relying on debt, it will only end up leaving the burden to future generations.


Politicians are responsible for discussing how to share the burden. If the Kishida administration has skirted around the issue out of fear of a possible backlash ahead of the House of Councillors election next summer, it can only be called gravely irresponsible.

  • Ambassador
  • G7 Summit
  • Ukraine