Consumption tax cut ``extremely bad for cost performance'' Doubts about price control effect - House of Representatives questioner

On the 27th, the House of Representatives Committee on Finance and Finance held a question-and-answer session with experts regarding the consumption tax reduction bill. Tsutomu Watanabe, professor emeritus at the University of Tokyo, who was in attendance, pointed out that it was an ``extremely poor cost-effective policy,'' and observers questioned the effectiveness of tax cuts in controlling prices.

Based on examples in Europe and past tax hikes, Watanabe explained, ``When the tax rate goes down, prices only go down by 4%, and when they go up, prices go up by 7%.'' Based on comparisons with inflation rates in other developed countries, he said, ``What is needed now is not to stop rising prices, but to correct low wages.''

Hiromichi Akiba, president of the Tokyo-based food supermarket Akidai, claims that even if prices were to drop by 7%, ``I don't think the joy will last for more than a month.'' On the other hand, he said that when the tax rate is raised in two years' time, there will be a greater sense of tax burden, and that it will be a blessing for the people's lives, but it will not be a relief.