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How the October Consumption Tax Hike Will Affect You

Worried about the upcoming increase in consumption tax in Japan? Here's how it might impact your daily life.

By 5 min read

Japan’s incoming October 1 consumption tax hike from 8% to 10% has both consumers and retailers in a tizzy, as varying exceptions and a temporary point system make the increase far from straightforward.

As a Mainichi editorial pointed out, the tax hike is intended to offset increasing government spending and debt. As the aging population continues to require more social security funds—and the government continues to buy expensive U.S.-made weapons—money has to be found somewhere.

But big questions of government financial policy aside, how is the consumption tax increase going to affect our lives in Japan come October 1?

What food and drink will be taxed? Only alcohol and eat-in meals

Most food and drink are exempt from the tax hike. So the pre-tax ¥92 bottle of water from the convenience store will remain an even ¥100 when rung up at the register.

However, alcohol and meals eaten in dining establishments will be taxed at the new 10% rate. With the hike looming, many beer brewers are raising production levels to meet a predicted spike in demand before the tax comes into effect.

Takeout versus eat-in prices are thrown into uncertainty by the hike. Food eaten in will be subject to the tax, while takeout will remain at the current rate. At convenience stores with an eat-in area, customers may need to inform the cashier of where they intend to eat to determine the applicable tax rate.

Some food chains are adjusting all of their prices

Some chains, including Sukiya, Saizeriya, and KFC, will adjust their before-tax prices so that takeout and eat-in items cost the same.

At others, such as Yoshinoya and Starbucks, an eat-in meal will be more expensive.

At convenience stores with an eat-in area, customers may need to inform the cashier of where they intend to eat to determine the applicable tax rate.

Starbucks will charge you more for eating in-store

To use Starbucks as an example, a sandwich priced at ¥460 excluding tax costs ¥496 at the register. With October’s new system, that price will remain the same (8% tax) if you get the sandwich to go, but it will be raised to ¥506 (10% tax) if you eat in—a ¥10 difference.

Hey, maybe it will be 2% easier to find a seat in a normally crowded Starbucks.

Should I rush to make large purchases before the hike?

Many consumers are looking to make big purchases before October. Sales on items from refrigerators to kimono are reported to have risen by as much as 30 or 40%, and some retailers are putting out winter items ahead of schedule in a bid to snag pre-hike bargain hunters.

Sales on items from refrigerators to kimono are reported to have risen by as much as 30 or 40%

Say you think now is the time to invest in a 4K TV. A TV priced at ¥59,723 is currently charged at ¥64,500 after-tax, but when the 10% rate comes into effect it will cost ¥65,695. Even on a relatively big purchase like this TV, that’s still only a ¥1,195 difference.

The last time the consumption tax was raised, from 5 to 8% in 2014, consumers invested in cars and houses before the hike hit. This time, the government hopes to avoid a dramatic decrease in automobile purchases after the hike by cutting a different vehicle-related tax. Consequently, there hasn’t been a significant rush to buy cars.

You can get points for paying more tax

The new consumption tax includes incentives to ease the transition to 10% and prevent a dip in purchasing. The incentives are welcome in theory, but in practice, it means that purchases will initially fall under one of five different tax rates (3, 5, 6, 8 and 10%) depending on the type of goods or store.

Cashless payments will be rewarded with points for the first nine months of the new tax: 5% of the purchase price at small and midsize shops and 2% at convenience stores and other major chains. If you’re confused, don’t worry as the government has created a handy 3,600-page pdf for consumers to explain how and where you can benefit from the points system.

But some konbini are considering implementing discounts instead (including on alcohol)

Apparently, the major convenience stores are considering using the points to discount items at the time of purchase, rather than saving them for later.

If they choose to do so, it would mean that convenience store purchases that fall under the new rate (e.g. alcohol) will not be affected—and exempt items will actually become cheaper—for the first nine months of the tax hike, provided you pay without cash.

When will I start getting taxed?

Although it falls on a Monday, say you are out at midnight on September 30. Will you be charged the extra 2% at 12:01 for a beer you picked off the convenience store shelf at 11:59?

In situations like this, the tax on purchases straddling the date change will be determined by the retailer.

Japan Today breaks down many examples of how businesses plan to handle this issue, including convenience stores (rate determined by the time the item’s barcode is scanned), trains and taxis (old tax rate applies until the morning of October 1), family restaurants (settle your bill before midnight to avoid the hike), and more.

Outcall sex services will reportedly stick to the 8% rate until the next day. How generous.

What to do about the tax hike

How do you plan to weather the hike? Buy enough beer to last until your JET contract expires? Have a last hurrah at your favorite izakaya before leading a takeout-based existence come October 1? Frantically bargain hunt until the end of September?

In terms of everyday life, the consumption tax hike is not as terrifying as some might have us think.

Everyone manages their finances differently, so I won’t tell you how to spend or not spend your hard-earned yen. Personally, after seeing the relatively small price jump in the above examples, I don’t think I’m going to change my spending habits.

Pre-hike sales—which hopefully offer much more than a 2% price difference—are enticing, but equally good sales will occur in the future too.

In any case, we will surely be thinking of the 10% rate with wistful longing when it’s inevitably raised another few years down the line.

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