The Economist - USA (2019-09-28)

34 Asia The EconomistSeptember 28th 2019

2 houses (which incur the lower 8% tax rate

if the sales contract was signed before

April). That has boosted the demand for

air-conditioners, according to the Bank of

Japan (boj), the central bank. But they see

few other signs of pre-emptive purchases.

Of course, consumers may be waiting until

the last minute to buy some smaller-ticket

items (including beer).

The absence of a boom does not neces-

sarily mean no bust will follow. But the

government hopes the impact this year will

be much less than it was five years ago. The

tax increase is smaller (two percentage

points, not three). And unlike today,

households five years ago expected a sec-

ond increase (from 8% to 10%) to follow

hard on the heels of the first (from 5% to

8%). Their purchases in early 2014 were an

attempt to avoid both. They stocked up on

cars, furniture and other durable items

they would not need to replace for years.

The higher tax will also be offset by oth-

er measures. The government will spend

part of its increased revenue on child care

and pensions. It will cut a separate tax on

car emissions. And with the government’s

help, thousands of small retailers will offer

rebates or “reward points” worth up to 5%

of a product’s price, to customers who

make cashless purchases by card or phone.

The government will also punctuate the

smooth uniformity of the consumption tax

with a number of exemptions. The in-

creased rate will not apply to food (except

meals served in restaurants), beverages

(except alcohol) and newspapers (exclud-

ing those, like this one, published less than

twice a week). That will make it easier for

people to read reports of the economic fall-

out over a green tea and a takeaway.

In principle, any damage to the econ-

omy could also prompt an offsetting re-

sponse from the boj. In a speech this week,

Haruhiko Kuroda, the bank’s governor, pre-

dicted that the tax’s impact would be “mar-

ginal” compared with the previous in-

crease. But he was also fairly relaxed about

that increase prior to the fact. “Even as-

suming two consumption-tax hikes...Ja-

pan’s economy will continue to grow above

its potential growth rate as a trend,” he said

in 2014. In fact, the economy’s growth was

about 1.5 percentage points below potential

for the next six months.

If Mr Kuroda is unpleasantly surprised

again, the bank could cut short-term inter-

est rates even further below zero (its

benchmark rate has been -0.1% for almost

four years) or expand the scope of its asset

purchases. But that would be unpopular

both with bankers, who worry about their

margins, and with households, who worry

about their savings. It might also be inef-

fective. As Goushi Kataoka, a dovish mem-

ber of the boj’s policy board, has pointed

out, the central bank has repeatedly cut its

outlook for inflation without easing policy

accordingly. That suggests the board’s

hawks, who think easing is unwarranted,

have been joined by defeatist doves, who

think further easing would be warranted

but doubt it would be effective.

Their defeatism is easy to understand.

Inflation was originally scheduled to climb

to 2% in 2015. That timetable has been re-

vised six times since. Now the bank merely

says that inflation will increase to 2%

“gradually”. Japan’s vaunted reputation for

punctuality does not apply to monetary

policy either. It’s enough to drive a central

banker to drink. 7

An encouraging torpor

Sources:BankofJapan;TheEconomist

Japan, consumer-durables sales index

Real terms

Monthsbefore/afterconsumptiontaxraised

90

100

110

120

130

-18 -12 -6 0 6 12 18

2019

Q2 2018=100

2014

Q4 2012=100

Consumption tax

increase

W

hen rodrigodutertethreatens

criminals, they pay attention. After

all, since becoming president of the

Philippines three years ago he has cham-

pioned an all-out war on drugs that has

claimed between 5,000 and 20,000 lives

(the numbers are disputed). So when Mr

Duterte warned a big group of convicts

freed from prison by mistake that, if they

failed to turn themselves back in, the

police would return them to their cells

dead or alive, 2,221 duly surrendered. The

odd thing was, the prisons authority said

that only 1,914 had been released in error.

Although part of the discrepancy may

have been because of further mistakes on

the part of the aptly named Bureau of

Corrections, part, at least, was because of

the terror with which Filipinos now

regard the police.

Behind the turreted gateway of the

National Penitentiary, south of Manila,

lurk the likes of Antonio Sanchez, a

notoriousrapistandmurderer.MrSan-

chez had believed he could get away with

his crimes because he was mayor of a

provincial town, but in 1993 a judge

imprisoned him for 40 years. News this

year that Mr Sanchez might be freed early

for good behaviour caused an uproar. It

then emerged that hundreds of other

prisoners had already been freed early

for good behaviour, even though the

severity of their crimes should have

made them ineligible. Mr Duterte dis-

missed the director-general of the Bu-

reau of Corrections, called for a special

prosecutor to investigate the debacle and

instructed the convicts in question to

report back to prison.

Predictably, the list of mistakenly

freed prisoners released by the bureau

omitted some names that should have

been on it and included some prisoners

who had been let go on legitimate

grounds. To be on the safe side, it seems,

some 300 people who weren’t on the

bureau’s list surrendered.

The newly re-incarcerated convicts

will be wondering what sort of regime

now awaits them. The dismissed direc-

tor-general of the Bureau of Corrections,

Nicanor Faeldon, was himself a former

jailbird, having joined an unsuccessful

mutiny when he was in the army. He

even escaped twice. The new director-

general is Gerald Bantag, who faces ho-

micide charges related to the deaths of

ten prisoners in a grenade blast in his

office when he was warden of a munici-

pal jail. The police say Mr Bantag was

negligent in allowing weapons into the

prison. Mr Duterte describes him as

“professional”. It may be that prison is no

safer for the nervous convicts than life

on the run.

Breaking into jail

Prisons in the Philippines

An administrative error reveals the fear Filipinos have of the police