Updated: Nov 4, 2019
Written By: Nadira Anissa
Date Published: 1st November, 2019
Last month on October 1st, 2019, Japan increased their consumption tax from 8 to 10%.
As of October 1st, 2019 Japan's 8% sales tax has been increased to 10%. According to the Ministry of Finance, this is a last-resort attempt to sustain the social security system that helps support the elderly in Japan. However, these tax changes can be confusing for those living in Japan, because there are exceptions for certain products. We're here to help you navigate the new tax rates, and learn what has been affected.
So how does the tax work?
Food and drinks are not part of the tax, as they are considered daily necessities.
So if you decide to buy a drink in a convenience store near your house you’ll pay as usual. However, alcohol and restaurant foods will be taxed the 10%.
Yet, keep in mind, take-out food is not part of the tax. That’s why restaurants are trying to adapt their prices so their take-out and eat-in food have similar prices.
Things that you buy in places like the 100 Yen store that used to become 108 Yen, have now become 110 Yen when you buy them. One item doesn't make a big increase, but 10 items certainly will have a bigger impact.
Below is a chart from the Ministry of Finance for you to better understand the items that has its prices increased.
For more detailed information and explanation you can click here. The Ministry of Finance in Japan released an English explanation on the tax and also the reasons for it.
We also interviewed students living in Japan on their perspective of the tax Increase and whether or not it has affected their everyday life.
The Impact on Students
Most students that were asked about the tax, are well aware of this tax increase, and also the reasons for it.
Nabila Khansha Irawan, an Indonesian student currently residing in Osaka, studying in OCA大阪デサイン＆IT専門学校、was one of the interviewees that I asked on the topic of this tax increase. She mentions she's been preparing for the tax increase, “I’ve known about this tax increase for quite a while already, I heard it around June or July from my friends.”
As explained previously, Nabila also explained her understanding of the reason for the tax increase, “From what I know the reason for this tax increase is to pay the public debt, because now there's an increase in need for funds to the elderly. The population of the elderly is increasing, while the working population is decreasing."
Nabila is a kpop fan, and the tax increase will affect her ability to afford fan goods.
On the other hand Gusti Raganata, another Indonesian student that just recently graduated from University of Tokyo answered that, “I actually have heard about this tax increase on the news. However, if i'm not mistaken the increase was actually delayed.”
Yuki Takahashi, a Japanese student that is currently studying in Ritsumeikan Asia Pacific University, also explained her understanding of the consumption tax increase, “I believe the tax increase was implemented because of the aging population and falling birth rate in Japan. The tax will be used for social security reforms such as providing childcare and education to children under 6.”
What do you think about the tax increase?
“I understand why the tax needed to be increased. But honestly I was quite frustrated to have a 2% increase. I guess on the other hand now that its 10%, its much easier to calculate the tax we have to pay,” Nabila answered jokingly.
Other students also have differing opinions on this tax increase, Gusti mentioned that, “I think this increase would be much tougher on foreigners that are living in Japan permanently and on a tight budget, or for students that are self funded. But because I understand that the reason for this tax increase is to help create free education and also child care, I support this tax increase."
On the other hand Yuki personally thought that the increase was quite confusing, she said that, “ I feel a bit confused because some products are still charged 8% tax while the rest are charged 10%. The amount of tax being charged depends on the product/service you are getting as well as the situation you are in. I do not completely support this change because it can affect so many other things that come along with the tax increase. For example, if you decide to eat at a fast food restaurant, you'll have to pay 10% but if you take away the food, you only have to pay 8%. People are more likely to take away the food since it is cheaper but the amount of single use materials that will be used because of this action will also increase.”
So far has the tax increase affected your lifestyle or daily life in anyway?
Nabila answered that at first she was quite worried about this increase, “Personally, as a student I didn't agree with this increase, because I thought it would affect my everyday life. However in the past few weeks that the tax increase has been implemented, I actually didn't really feel any big changes. Since my baito pay also increased it didn't really affect my daily life.”
Other students also had similar opinions, Gusti answered that, “It didn't really affect me, because I tend to cook more at home rather than eating out, and although some items are a bit more expensive there's no big difference. Maybe we can really feel the impact when we buy items that are above 10,000 Yen.”
“For me, Since some shops are implementing cash back promotions, I try to use my credit card whenever I can. I also think carefully before buying things now that I have less disposable income, answered Yuki. Also another important note since the tax increase implementation, a big change is when you use cashless ways of paying such as Line Pay, PayPay, Wepay, and many more. You are able to get a 2% cashback for the items that you have bought.
Tips and Tricks
So now that you know more about the consumption tax increase, don’t be surprised if that new smart phone or car you were planning on buying is more expensive than what you saved up for a few months ago. Here are our final tips for navigating the new tax.
1. Try going cashless when you can, to save up bit by bit. You can earn 2% or 5% cashback when you use it. Although it might not seem like a lot, it adds up, and can get you another meal or item someday.
2. Try cooking at home or doing take out. Limit your restaurant stops.
3. Learn what is taxed and what isn't, and keep it in mind when out shopping.