The gift that keeps on

Prime Minister Taro Aso has promised the rest of the world that he will do his best to stimulate Japan’s economy, and one of the ways he plans to do so in the next supplemental budget (¥15 trillion, the highest on record) is to provide a tax exemption for monetary gifts from parents to their children.

Of course, there’s a catch. In order to qualify for the tax exemption, the gift has to be used to either purchase a home or remodel a home. Basically, the idea is that there is some ¥1,400 quadrillion that is not circulating in Japan, but rather just sitting in people’s back accounts or in their mattresses (or, to put in Japanese terms, in the tansu, or wardrobe). About half of this dormant money is in the possession of Japan’s elderly. Normally, when these people die, the money goes to their offspring, who, in turn, just put it into their own back accounts or in their own wardrobes. Since people live quite long in Japan, their children usually are already settled with their own homes when they die. Aso’s scheme is to persuade these older people to give some of their money to their kids (or grandkids) earlier, at the time when they are thinking of buying a home.

The budget has to be passed before this goes into law, and the opposition says it basically subsidizes the rich. But it is sort of half-assed anyway, since the maximum gift that can be tax exempt is ¥6.1 million, and it costs at least ¥20 million to build a halfway decent house in Japan.

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