Japan plans tax break to encourage spouses to work more hours

Japan says its economy grew at a slower pace than earlier estimated in July to September, expanding at an annual pace of 1.3 percent. (AP)
Updated 08 December 2016
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Japan plans tax break to encourage spouses to work more hours

TOKYO: Japan’s ruling coalition has approved a plan to increase a tax credit for married couples to encourage spouses who work part-time to increase their hours, hoping to relieve chronic labor shortages in some sectors.
The plan, part of Prime Minister Shinzo Abe’s labor reform drive, lets primary earners claim a tax deduction of 380,000 yen ($3,352) if their spouses earn up to 1.5 million yen a year, versus the current 1.03 million yen ceiling.
Abe hopes that a higher ceiling will encourage lower-earning spouses — many of whom housewives who keep working hours below the 1.03 million yen cap — to work more as labor shortages in Japan’s fast-aging society threaten to stifle economic growth.
The annual tax code revision is expected to be endorsed by the cabinet this month and submitted to parliament early next year.
Junko Sakuyama, an economist at Dai-ichi Life Research Institute, wrote in a report, “I doubt if this revision alone will expand employment of medium- to low-income part-timers.”
The ruling coalition initially sought to abolish the spousal tax deduction and switch to a standard tax break for married couples regardless of their income.
But they dropped this idea out of concern it would upset households with a high income-earner and a homemaker.
The planned revision will not affect households with couples who both work full-time, but it basically benefits ones comprising a full-time employee and a part-time worker.
The Cabinet Office said that Japan’s economy grew much slower than initially estimated in the third quarter, revised data showed, as capital expenditure dried up and companies ran down inventories.
It said that the economy grew at a 1.3 percent annualized rate in July-September, a severe revision from the 2.2 percent annualized growth first estimated and barely over half the median estimate for a 2.4 percent annualized expansion.
Capital expenditure fell 0.4 percent in the quarter, versus the preliminary estimate of 0.0 percent, as steel and real estate companies reduced investment.
On the positive side, consumer spending was revised up and separate data showed services sector sentiment improved. However, weak capital expenditure may temper optimism that the economy could accelerate heading into next year.
“Capex and consumer spending are the twin engines of domestic demand, and I’m not convinced that both will recover strongly,” said Norio Miyagawa, senior economist at Mizuho Securities.
“We have government stimulus and a weak yen, so the economy will continue to grow, but growth will be modest.”
Inventories subtracted 0.3 percentage point from growth, more than a preliminary reading of a 0.1 percentage point contraction, which showed that a recent buildup in inventories was slowing, and a positive sign that companies were able to sell excess goods, Miyagawa said.
Net exports added 0.3 percentage point to growth in July-September, less than a 0.5 percentage point contribution in the previous quarter.
However, economists were optimistic that exports would pick up in the future as the yen had fallen to an eight-month low after Donald Trump was elected US president.
Japan’s government has also approved a stimulus package with 7.5 trillion yen of spending on public works, which should marginally support growth next year, economists say.
Private consumption, which accounts for roughly 60 percent of the economy, rose 0.3 percent, versus the preliminary estimate of 0.1 percent growth, as households spent more on food and beverages, TV sets and domestic travel.
The government adopted a new base year for calculating gross domestic product, which lifted nominal GDP closer to the Prime Minister Shinzo Abe’s target level.
The new calculation method, which will include research and development as capital expenditure for the first time to conform with international standards, has been applied to GDP data going back to 1994.
Because of this change, business investment was 17 percent higher last quarter than previous data had suggested, according to Marcel Thieliant, senior Japan economist at Capital Economics in Singapore.
Cabinet Office data showed the new calculation method added 19.2 trillion yen to capital expenditure in fiscal 2015, versus an 18.5 trillion yen contribution in the previous fiscal year.
“The changes have made the capital expenditure data more accurate,” said Hiroshi Miyazaki, senior economist at Mitsubishi UFJ Morgan Stanley Securities.
“This won’t change the overall pace of growth. I expect capital expenditure to bottom out in the current quarter.”
An index of sentiment among so-called “economy-watcher” service-sector workers, such as taxi drivers and restaurant staff, rose to 53.5 in November, the highest since March 2014, as a stock market rally and a falling yen made employees more optimistic.


Saudi energy minister compares electric vehicle ‘hype’ to peak oil misconceptions

Updated 15 October 2018
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Saudi energy minister compares electric vehicle ‘hype’ to peak oil misconceptions

  • Khalid Al-Falih on Monday questioned what he described as the “hype” of the electric vehicle market
  • Compared it to past misconceptions around the theory of peak oil

LONDON: Saudi Energy Minister Khalid Al-Falih on Monday questioned what he described as the “hype” of the electric vehicle market and compared it to past misconceptions around the theory of peak oil.
He told the CERAWeek energy gathering by IHS Markit in New Delhi that petrol and diesel engines would co-exist with emerging electric and hydrogen fuel cell technologies for much longer than widely expected.
Miscalculations around the pace of electrification could create “serious” risks around global energy security, he said.
“Conventional vehicles today, despite all the hype, represent 99.8 percent of the global vehicle fleet. That means electric vehicles with 0.2 percent of the fleet, only substitute about 30,000 barrels per day of oil equivalent of a total global oil demand of about 100 million barrels.
“Even if those numbers increase by a factor of 100 over the next couple of decades, they would still remain negligible in the global energy mix.”
He said: “History tells us that orderly energy transformations are a complex phenomenon involving generational time frames as opposed to quick switches that could lead to costly setbacks.”
In another broadside aimed at electric vehicles, the Saudi energy minister highlighted past misconceptions about global energy demand growth — and specifically the notion of “peak oil.”
“I remember thought leaders within the industry telling us that oil demand will peak at 95 million barrels per day. Had we listened to them and not invested . . . imagine the tight spot we would be in today.”
“Let’s also remember that in many parts of the world, roughly three fourths of the electricity, which would also power electric vehicles, is currently generated by coal, including here in India. So you could think of any electric vehicle running in the streets of Delhi as essentially being a coal-powered automobile.”
“When it comes to renewables, the fundamental challenge of battery storage remains unresolved — a factor that is essential to the intermittency issue impacting wind and solar power. Therefore the more realistic narrative and assessment is that electric vehicles and renewables will continue to make technological and economic progress and achieve greater market penetration — but at a relatively gradual rate and as a result, conventional energy will be with us for a long, long time to come.”