photo by HAMED MASOUMI

One of the reasons for many ex-pats in Japan to take up or continue smoking is their relative low-cost to cigarettes back home.  Currency exchange is one thing but also the fact that the Japanese Government has resisted temptation to whack high taxes on tobacco unlike most other governments throughout the world.

The cost can be as much as 60% cheaper than other developed countries with a box of “Marlboro Lights costing a mere 320 yen, compared with around 600 yen to 800 yen in the European Union.” (Wall Street Journal)

It’s an interesting problem for the new government.  On the one hand they need to rapidly increase funds available for their political reforms and an increase in tax on cigarettes would generate a pool of cash to start with.  But the cigarettes tax issue has been a delicate problem for a while.

Whilst most minsters admit that there is a health problem associated with smoking and an increase in tax would deter some smokers from lighting up and lighten the load on smoke-related health problems and expenditure in hospitals, others would argue that an increase in tax wouldn’t raise that much cash as a sales decrease would negate any possibility of a significant fund raiser and affect current tax revenues on cigarettes.

At the same time, there is a well known relationship between the Japanese Government and Japan Tobacco – Japan’s biggest tobacco company.  The Japanese Government owns about a 50% stake in the business so this would affect any decisions made.

But with the US and many countries in Europe leading the way with smoke-free zones and outdoor bans, it is only a matter of time before the government in Japan is pressured into addressing this burning issue also.

Higher tobacco taxes would be a start.

Japan down, next stop America.

These are the thoughts of the New York Times as summed up in Benzinga.  According to Benzinga, Japan may become the next “Switzerland – rich and comfrotable, but of little global impact”.

But what about the immediate future?  What about it’s position as the 2nd largest economy?  Where is China?  Is it still hot on its heels or never going to really challenge?

Benzinga summed up these points from the New York Times:

1. For years, Japan has been readying itself for the day that it is eclipsed economically by China. But as a result of the global slowdown, Japan’s difficulty in managing its economy and China’s rise — on vivid display Thursday as Beijing celebrated the 60th anniversary of the founding of the People’s Republic — that day may come sooner than anyone predicted.
2. Though recent wild currency swings could delay the reckoning, many economists expect Japan to cede its rank as the world’s second-largest economy sometime next year, as much as five years earlier than previously forecast.
3. At stake are more than regional bragging rights: the reversal of fortune will bring an end to a global economic order that has prevailed for 40 years, with ramifications across arenas from trade and diplomacy to, potentially, military power.
4. China’s rise could accelerate Japan’s economic decline as it captures Japanese export markets, and as Japan’s crushing national debt increases and its aging population grows less and less productive — producing a downward spiral.
5. Not long ago, Japan was “the economic miracle,” an ascendant juggernaut on its way to rivaling the United States, which has the biggest economy. Now, many here ask whether Japan is destined to be the next Switzerland: rich and comfortable, but of little global import, largely ignored by the rest of the world. Yet even this widely held hope among the country’s 127 million people may be slipping from Japan’s grasp.
6. The per-capita gross domestic product of Japan, which surged past that of the United States in the late 1980s, stalled at $34,300 in 2007; it is now a quarter below American levels and 19th in the world. Both income inequality and poverty are on the rise.
7. (Over the last 2 decades) Japan stagnated as huge public works projects aimed at reviving the economy went toward protecting moribund industries instead of fostering new ones, failing to lift Japan out of its doldrums while creating a huge debt burden.
8. The richest man in Japan, the retailing entrepreneur Tadashi Yanai, was 76th in the most recent global Forbes list, behind moguls from countries like Mexico, India and the Czech Republic — a far cry from the late 1980s, when Japanese industrialists like the railroad tycoon Yoshiaki Tsutsumi were among those at the top.
9. China has also surpassed Japan in having the biggest trade surplus and foreign currency reserves, as well as the highest steel production. And next year, China could overtake Japan as the largest automobile producer.

Will the new ruling Democratic Party shape a new economic future for Japan and help them to turn the tide of the incoming Chinese Economic wave?  At least temporarily?

Only time will tell what will happen and when but with the rate of growth and strength in China at the moment, they are looking down on the world from above – but not from the top of a rollercoaster about to plummet.  For China, the ride is just getting started.

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