ABSTRACT
With housing construction down 30 percent from its 1990 peak, tax breaks for housing would seem to be in order. Within an hour’s commute from Tokyo center, almost half the land is either idle or nominal “farmland.” A failed stockholders’ revolt at clothing-maker Tokyo Style has made famous the all-too-common syndrome of cash hoarding at Japanese companies. The biggest flaw in the current tax discussion is that it seems to move the entire tax system in a regressive direction—lightening taxes on companies and upper-income individuals while raising them on lower- and middle-income households. Japan is gradually switching away from income taxes, which are both countercyclical (i.e., they help dampen booms and busts) and progressive (i.e., they tax richer people and firms at a higher rate). Japan’s Ministry of Health, Labor, and Welfare has its own index measuring how much the tax system redistributes income, with a lower number meaning less redistribution.
