The international business news of April 24th in New York Times carried the information of the fastest rise in inflation for consumer goods in Tokyo since 1992. The news which was a courtesy by Reuters informed that the rise in consumer tax in Japan from an earlier 5% to the latest 7 % has indefinitely caused the increase in price floor for most goods. This type of price changes therefore shows the economic status of Tokyo in terms of inflation. Tokyo has set a target for the inflation to be 2%. So far most of the firms have not yet embraced the change in tax so that in return they can increase the wages to cover up the cost. In Japan, fighting deflation is a real war that they seem to be winning albeit slowly. Most of the firms therefore have to increase the wages for all their workers so that they can be able to cover up the cost which has been added to them. According to the Bank of Japan, this increase in cost will lead to an addition of 1.7 % to their inflation which to them it’s a great step.

This type of an article relates with the topic of tax incidence in the economics. Tax incidence is defined as the impact of issuing tax on goods for both buyers and sellers. In most cases the burden of paying the tax lies on both the sellers and the consumers. Most sellers may end up getting less profit while the buyers end up paying more than they should. The difference that they get is usually referred to as the tax burden .When there is tax burden, this means that both the consumers carry the weight of paying tax because the buyers get to pay more and sellers get to incur small profit. In several cases like the one for Tokyo; the tax burden could be more inclined on the buyer than the seller. This largely lies on the type of goods that have been taxed and their price elasticity. For their case, they have only increased the price for oil products by 2.7 %. Oil and oil products in most cases have no alternatives thus the buyers still have to buy them and bear the cost for the increased tax. This increased tax for the buyers is termed as the tax burden.

Most governments when faced with an economic crisis tend to tax those goods that consumers cannot do away with so as to raise the money fast. This places the tax burden on the citizens who have to pay more so that the surplus can be transferred to revenue. Tokyo has been having economic difficult times this year with the increase in debts. A tax raise from 5 % to 1 % is a very high margin for everyone however there is no other better option to raise the much needed revenue for the country. Japan is now at a better position to clear its public debts since the revenue will go to doing just that. In most cases when there is an increase in tax, the companies or the sellers are usually handed over the burden of passing the tax increment to consumers. When the consumers embrace the tax increment then the hardest part is to maintain the inflated environment and to ensure that the revenue collected goes to the much needed sectors of the economy. For a country like Japan which has been having low prices for the longest time; this can be termed as a great step towards economic stability and self reliance.