TT-663 -- Where Consumption Tax Can't Go, ebiz news from Japan

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, May 27, 2012, Issue No. 663


- What's New -- Where Consumption Tax Can't Go
- News -- Japan Atomic Power being paid to do nothing
- Upcoming Events
- Corrections/Feedback
- Travel Destinations Picks -- Nikko and Miyazaki
- News Credits

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This weekend the Nikkei ran an article about the fact that
Rakuten and other internet companies are looking to start
selling e-books and online ads to Japanese domestic
customers from abroad, so that they can avoid paying
consumption tax. At 5% the tax isn't so high that it's
worth bothering about, compared to the cost of
administrating such sales and foreign sourcing. However,
with a publicly flagged rate of at least 10% and possibly
as much as 15% or more in the next 5 years, companies are
starting to realize that consumption tax is both burdensome
and also avoidable.

It's avoidable because along with the many other countries
that have similar sales taxes, consumption tax is typically
confined to goods and services consumed in the country of
sale. This means that products sold abroad then exported
into Japan are not taxed here but instead at the point of
sale. Thus, if the sale is made from a location where there
is no sales tax, such as Alaska or Oregon in the USA, or
Hong Kong here in Asia, then the Japanese authorities miss
out on the tax revenue.

Currently Japan is unable to do anything about cross-border
sales tax irregularities because international free trade
policies have for a long time held that exports should be
free of sales taxes, so as to encourage exports. However,
already in Europe, online cross-border transactions between
EU countries are tax-balanced and now the OECD is
apparently looking into similar measures. However, unless
the USA decides to suddenly go for cross-border taxes,
something that is very unlikely while it is actively
pushing exports, we don't see the situation changing here
any time soon.

[Continued below...]

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[...Article continues]

Already,, and other foreign exporters
are enjoying consumption tax-free exports to Japan, so it
is only natural for Japanese firms to want to do the same.
They need to be a bit circumspect about it, though, or they
will invite some kind of domestic measures against such
structuring. Rakuten is the most advanced of Japanese firms
looking at transacting outside Japan. The company is going
to use a Canadian ebook firm they took over in January,, to start selling Japanese titles to customers in

The whole zero-consumption-tax-by-importing-from-abroad
equation is starting to look more and more attractive for
consumers, and not just in the ebooks and online ads.
Even food is now starting to become viable as a personal
import, being cheaper and easier than going down the road
to the local supermarket to buy.

To take a case in point, if you were to buy some Bob's
Quick Cooking Rolled Oats, admittedly a western diet
preference, you would be paying US$2.19 (JPY175) for 453gm.
A similar product here put out by Nisshoku and coming in a
300gm packet is about JPY350. Now add up enough other
grocery items in your online grocery order to bring the
weight up to 13kg, and you can get the whole box into Japan
by air (two days, Sagawa kyubin) for just US$10.71! That
effectively means the freight and home delivery of the
Bob's oats is JPY66+JPY175=JPY241 for 30% more volume.

Now add on that rumored 10% consumption tax for the Nisshoku
product, and your domestic shopping total comes to JPY385.
The imported Bob's product is starting to look pretty good,
both in basic price, delivery, and in having no consumption
tax either. Not just rolled oats, almost any western
grocery item, cleaner, vitamin and supplement, music,
books, etc., is equally cheaper and carries no consumption
tax -- something that will be even more noticeable in two
year's time when taxes go up. And since the Japanese are
moving en masse to a more western diet, it's a trend that
is likely to increase.

Therefore, it is not inconceivable that if the yen
continues to stay high, and in 2014 the consumption tax
does rise to 10%, that some enterprising grocery
wholesaler is going to set up a warehouse and off-shore
shopping facility even closer to Japan than in
California, and make it easier/cheaper for Japanese to do
their shopping online. Greenies like to talk about "food
miles" -- well the Japanese could be the first nation in
the world to turn the concept upside down by doing the bulk
of their non-perishables grocery shopping abroad.

Where would such a warehouse be set up? As we indicated,
Hong Kong would be a likely spot, since it's always had a
favorable tax system. But air freight costs to Japan from
Hong Kong are not that competitive, especially for small
shipments. Likely alternatives would be Pusan, South Korea,
and Taipei, Taiwan. South Korea has a 10% consumption tax,
so the entrepreneur would need to persuade the Korean
government to let the company hold their inventory tax
free, for export purposes, in one of the country's 9 free
trade zones. Probably not so difficult. Otherwise, Taiwan
has a 5% sales tax rate, and so would already be
cost-competitive, even without export zone assistance.

...The information janitors/


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+++ NEWS

- Japan Atomic Power being paid to do nothing
- Russian consul-general for Niigata dies in fall
- Palm oil imports soar, replacing soy oil
- Interesting stats on Japanese public schools abroad
- HIS makes big turn-around on Huis Ten Bosch

-> Japan Atomic Power being paid to do nothing

The bureaucrat's amakudari system is wasteful, but in the
case of Japan Atomic Power (JAP), it's also shameful. The
company, which owns two nuclear power plants that are
currently producing no electricity, managed to declare an
FY2011 profit of JPY8.9bn thanks to its guaranteed pricing
arrangement with its utilities customers (who are also its
shareholders). The company delivered only 4.6% of the power
it is normally supposed to deliver and the losses caused by
the outages were passed directly to TEPCO and the other
utilities that buy from it. ***Ed: Even more shameful is
the fact that the TEPCO Chairman who is resigning in June
to take responsibility for Fukushima, is going to parachute
into a paid directorship with JAP. Sickening.** (Source: TT
commentary from, May 26, 2012)

-> Russian consul-general for Niigata dies in fall

Vladimir Pushkov, the consul-general for Russia in Niigata,
accidentally fell down a 30m ravine and died at a Niigata
campsite on Saturday. Apparently he was celebrating his
birthday with friends at a camping trip volley ball match
when he fell off a cliff. The vice consul-general for
Niigata was also injured after trying to assist Mr.
Pushkov. (Source: TT commentary from AFP on, May
27, 2012)

-> Palm oil imports soar, replacing soy oil

Japanese oil importer/processor companies are likely to
bring in a record 600,000 tons of palm oil in 2012,
compared to 557,937 tons in 2011. The jump in the cheaper
palm oil comes as soybeans have risen 14% in price this
year, and are likely to keep going up due to increasing
demand from China. Most of the palm oil is going into food
products such as margarine, where 52,572 tons were produced
from palm oil, versus 10,643 tons from soy oil. ***Ed: And
so through sheer economics, Japanese dietary intakes
change, even though most consumers have no idea what their
products are sourced from. Palm oil has more saturated fat,
which may increase heart disease -- or may not, depending
on which study you believe...** (Source: TT commentary from, May 23, 2012)

-> Interesting stats on Japanese public schools abroad

In a Japan Times article about rule changes in Japanese
public schools abroad (i.e., government-funded schools for
Japanese kids living abroad with their parents on foreign
postings), there are some interesting stats about the size
of the school system overall. The article says that there
are about 65,000 kids living abroad with parents on
postings and that of these 19,000 kids were attending 88
Japanese public schools abroad. We presume that the other
46,000 kids are attending local foreign schools. (Source:
TT commentary from, May 27, 2012)

-> HIS makes big turn-around on Huis Ten Bosch

Amidst the news that travel firm HIS is expecting a record
increase in earnings this financial year (ending October
31st), we notice that one of the strong contributors to the
group profit was the firm's Huis Ten Bosch Dutch theme park
in Nagasaki. The fact that the park is making money is
really quite amazing and is ample testimony to HIS'
Chairman, Hideo Sawada's business acumen. Sawada bought
the park after almost 20 years of red ink and several bust
owners had consigned it to the trash heap. The park now
accounts for 20% of HIS group's pretax profits and
attracted 1.9m visitors last year. (Source: TT commentary
from, May 26, 2012)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.



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If you have been considering setting up your own company,
find out what it takes to make it successful. Terrie Lloyd,
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In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

=> No feedback this week.


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=> Futara-san Shrines of Nikko

Nikko Futara-san Shrine proper is huge, and includes the
peaks of the Nikko mountain range (Mt. Nantai, Mt. Nyoho,
Mt. Taro, and five other mountains), Kegon-no-taki Falls,
Iroha-zaka slope, three shrines, and many other less
famous points. Ancient people here believed that this whole
area was a place where God was sitting. In total, it covers
3,400 hectares—equivalent to around 34,000 square meters.

The original shrine itself, however, was established by
Priest Shodo 766 near where Hon-sha is now standing. When
Shodo and his disciples finally succeeded in reaching the
summit of Mt. Nantai in 782, he erected Oku-miya at the top
of the mountain. Later, Chugu-shi was built in 784 for the
people who couldn’t go and worship Oku-miya.

=> Nishimera Village, Miyazaki

Nishimera village is one of the more remote places to visit
in Miyazaki prefecture, close to Kumamoto, and one of the
most rewarding to nature lovers: with stunning mountain
scenery, picturesque bridges over crystal-clear rivers,
camping facilities, hiking and fishing spots, and a
refreshing indoor and outdoor onsen.

We stopped off for a soak in the hot spring, where for 400
yen, one can let the soothing waters rid the body and mind
of stored up stress. From the outside tub you can sit and
watch the pine and chestnut trees swaying to and fro on the
mountainside opposite in the gentle breeze, an activity
which was sleep inducing. Later, we were pleasantly
surprised to find the onsen has set aside tatami rooms for
resting, and on inspection we saw many people taking naps
on the warm spring afternoon.



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