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.


Dubai property developer Damac on hunt for land in Saudi Arabia

Hussain Sajwani
Updated 18 March 2019
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Dubai property developer Damac on hunt for land in Saudi Arabia

  • Brexit a “concern” for UK property market says Sajwani
  • Developer mulls investing “up to £500 million” on London project

LONDON: The Dubai-listed developer Damac says it is scouting for additional plots of land in Saudi Arabia, both in established cities and the Kingdom’s emerging giga-projects such as Neom.
Hussain Sajwani, chairman of Damac Properties, also said the company would look to invest up to £500 million ($660 million) on a second development in the UK, and that it is on track to deliver a record 7,000 or more units this year.
Amid a slowing property market in Dubai, Damac’s base, the developer is eying Saudi Arabia as a potential ground for expansion for its high-spec residential projects.
Damac has one development in Jeddah, and a twin-tower project in Riyadh — and Sajwani said it is looking for additional plots in the Kingdom.
“It’s a big market. It is changing, it is opening up, so we see a potential there … We are looking,” he said.
“In the Middle East, Saudi Arabia is the biggest economy … They have some very ambitious projects, like the Neom city and other large projects. We’re watching those and studying them very carefully.”
The $500 billion Neom project, which was announced in 2017, is set to be a huge economic zone with residential, commercial and tourist facilities on the Red Sea coast.
Sajwani said doing business in Saudi Arabia was “a bit more difficult or complicated” that the UAE, but said the country is opening up, citing moves to allow women to drive and reopen cinemas.
He was speaking to Arab News in Damac’s London sales office, opposite the Harrods department store in Knightsbridge. The office, kitted out in plush Versace furnishings, is selling units at Damac’s first development in the UK, the Damac Tower Nine Elms London.
The 50-storey development is in a new urban district south of the River Thames, which is also home to the US Embassy and the famous Battersea Power Station, which is being redeveloped as a residential and commercial property.
Work on Damac's tower is underway and is due to complete in late 2020 or early 2021, Sajwani said.
“We have sold more than 60 percent of the project,” he said. “It’s very mixed, we have (buyers) from the UK, from Asia, the Middle East.”
Damac’s first London project was launched in 2015, the year before the referendum on the UK exiting the EU — the result of which has had a knock-on effect on the London property market.
“Definitely Brexit has cause a lot of concern, people are not clear where the situation will go. Overall, the market has suffered because of Brexit,” Sajwani said.
“It’s going to be difficult for the coming two years at least … unless (the UK decides) to stay in the EU.”
Despite the ongoing uncertainty over Brexit, Sajwani said Damac was looking for additional plots of land in London, both in the “golden triangle” — the pricey areas of Mayfair, Belgravia and Knightsbridge, which are popular with Gulf investors — and new residential districts like Nine Elms.
Sajwani is considering an investment of “up to £500 million” on a new project in the UK capital.
“We are looking aggressively, and spending a lot of time … finding other opportunities,” he said. “Our appetite for London is there.”
Damac is also considering other international property markets for expansion, including parts of Europe and North American cities like Toronto, Boston, New York and Miami, Sajwani said.
The international drive by Damac comes, however, amid a tough property market in the developer’s home market of Dubai.
Damac in February reported that its 2018 profits fell by nearly 60 percent, with its fourth-quarter profit tumbling by 87 percent, according to Reuters calculations.
Sajwani — whose company attracted headlines for its partnership with the Trump Organization for two golf courses in Dubai — does not see any immediate recovery in the emirate’s property market, or Damac’s financial results.
“(With) the market being soft, prices being under pressure, we are part of the market — we are not going to do better than last year,” he said. “This year and next year are going to be difficult years. But it’s a great opportunity for the buyers.”
But the developer said Dubai was “very strong fundamentally,” citing factors like its advanced infrastructure, safety and security, and low taxes.
In 2018, Damac delivered over 4,100 units — a record for the company — and this year, despite the difficult market, it plans to hand over even more.
“We’re expecting north of 7,000,” Sajwani said. “This year will be another record.”