Yen for the Future

The Japanese Government is considering reflating their economy by encouraging their older generation to spend their savings, or at least give them away now – presumably to their children and grandchildren.  This is to be achieved by significantly increasing inheritance tax but simultaneously lowering tax on gifts.

It is an interesting idea because it is the opposite approach to the one being proposed in the UK, where the Conservative are (or were) talking about a major lift in the inheritance tax threshold to £1,000,000.  The result in Britain would be to increase money held in savings whereas in Japan the intention is to have the reverse effect, by spending the inheritance now.

Both countries face deficit problems and have large elderly populations.

In Japan it is not clear how elderly care will be funded if the elderly have already given away their money.

In Britain if they save their money the elderly will almost certainly have to use it if they need to pay for care.

Both countries end up raiding the nest eggs of older people.  This seems inevitable given the size of the national debt.  The tantalising lure of family silver sitting in the over-inflated value of houses and savings of earlier generations will surely prove too hard to resist.

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