Japanese economy boost through increasing tax-free income

Wed, 11/27/2024

by Ellie LeTu

Source: WSJ

• Raising tax-free income threshold

  • The tax-free income threshold will increase from ¥1.03 million to ¥1.73 million (approximately $6,727 to $11,779).

  • The plan aims to alleviate tax concerns and stimulate economic growth.

    • Encouraging part-time workers to take on more hours.

    • Increasing disposable income for consumer spending.

• Pricey plan for the government

  • The higher tax-free income threshold is estimated to cost the government ¥8 trillion annually.

  • Raises concerns about potential cuts to public spending and the rising public debt burden.

• Inflation eases the Japanese debt burden

  • Japan's inflation, which has been declining since July, reduces the real burden of public debt.

  • Borrowing costs decrease as future repayments are worth less than in today’s terms.

  • Transitioning to a more inflationary economy could help Japan finance this economic stimulus package more sustainably.