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Abe adviser says Japan needs Y10 trillion stimulus in each of next two years

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By Stanley White and Ami Miyazaki

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Japan needs Y10 trillion stimulus in each of next two years

Presumably that is in lieu of greater deregulation and substantial implementation of the third arrow.

5 ( +5 / -0 )

“We need to spend 10 trillion yen next fiscal year and another 10 trillion yen the following fiscal year to eliminate the deflationary gap,” he said.

Where do they find these idiots from, history has shown very CLEARLY that these yearly WASTES of money do only ONE thing, add debt to the country.

The govt should FIRE Fuji to save a couple $$, at least that would be real!

8 ( +9 / -1 )

Spend spend spend more taxpayer money, accumulate more govt debt but dont worry about it, it will be paid back sometime " later". Thats some deep advice. Meanwhile, not a peep from this guy about structural reforms. Very innovative thinking on display here.

6 ( +6 / -0 )

They are nothing but charlatans. They haven't got a clue what they are doing, so they just continue doing the same things over and over again, hoping that either a) issues sort themselves out, or b) issues are delayed until they leave their posts so the next lot of charlatans can worry about them.

6 ( +7 / -1 )

Don't you just despise these idiots?

40% plus of workers are on rubbish part time and contract contracts, so of course there's little demand in the economy. And there never will be as they never address this problem do they? The Japanese economy will never recover. These idiots are just playing games.

8 ( +11 / -3 )

So it's not that the 18 fiscal stimulus packages were too small but the money was not spent at sufficient velocity?

Half a dozen chumps on JT know that the medicine is just wrong, it's not that it hasn't been administered fast enough.

These fiscal stimulus trickle-down packages don't work, because they merely enrich one group of people at the expense of the rest of us. A construction worker gets some juice and life goes on. The rest of us see the government spending money like crazy without doing anything to promote real sustainable growth. The construction worker has built a useless bridge or wall somewhere, but why would even idiots think that is suddenly going to make me or anyone want to spend money that we weren't going to anyway?

These textbook nutters may understand a few mathematical equations but that doesn't mean their failed models are ever going to work in the real world.

6 ( +7 / -1 )

Surely what's needed to fix the economy is to MAKE money.

Not SPEND it.

"My other piece of advice, Copperfield, said Mr. Micawber, you know. Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Charles Dickens

4 ( +4 / -0 )

Give XXX,000 yen coupon to every family in Japan, be sure this will be spend, instead of justification money for pork barrel project that will just end of some (and same) pockets.

0 ( +4 / -4 )

umbrella

Don't you just despise these idiots?

40% plus of workers are on rubbish part time and contract contracts, so of course there's little demand in the economy. And there never will be as they never address this problem do they? The Japanese economy will never recover. These idiots are just playing games.

Hence the need for structural reforms, although not of the kind that most of the inept senior management in Japan (and to be fair, most of the world) wants, which, in general, means making it easier for workers, aka consumers, to be made disposable.

I would say that the main problem in Japan is the high cost of a permanent worker: I have lived and worked in Canada, the US, the UK, and Japan, and nowhere else do companies pay transportation subsidies, or subsidies for children, or retirement bonuses (one to two years of salary).

Apart from distorting other markets (public transportation, for instance, where companies no longer charge the most that the market will tolerate - instead charging what businesses will pay since transportation fees then essentially become a business to business transaction - and housing, since one of the determining factors in choosing where to live becomes what transportation subsidy your company pays rather than what you would actually want in a community), it makes hiring a permanent worker significantly more expensive., it removes the responsibility for social welfare from the government, where is where it really should be.

Restructuring is also a major nuisance. It is made unduly hard, and part of that, I feel (although I have to be careful here) is also the government's abdication of its responsibility for social welfare. It should be easier for companies to restructure, but that would mean having a proper safety net for those whose positions may be cut due to changes in the corporate structure or corporate strategy.

But there is also internal corporate bureaucracy too. As we have more and more of these temps, companies are complaining that they cannot find skilled (and increasingly, unskilled, also) workers. But then, there are plenty of skilled (and I mean highly skilled, including PhDs in engineering, sciences, etc) who are languishing in these dead end temp jobs because either they are over 40/45 - which is already an improvement - it used to be 30 to 35 - or because they moved around too much (so who is going to go work at a startup - even if that is where much innovation happens - when it may fail and you may then find yourself unable to move into a proper career again?). Unfortunately, that is something the government cannot do much about. Until there are a few more "Sharps" (ie., being taken over by foreign owners to prevent bankruptcy), the corporate culture will not change.

8 ( +8 / -0 )

Stimulus packages only provide a temporary solution, and are losing their effect (as evidenced by topix trend lately)... Can we please move on to the third arrow he promised years ago?

2 ( +3 / -1 )

citizen2012

Give XXX,000 yen coupon to every family in Japan, be sure this will be spend, instead of justification money for pork barrel project that will just end of some (and same) pockets.

But in yesterday's article stating that business was unimpressed with the stimulus packages and BoJ easing (Japan Inc not enthusiastic over Abe's stimulus, BoJ easing), there were admonitions not to turn to helicopter money (which is exactly what your suggestion is)....

So Japan Inc wants a free hand to do whatever it wants (hire day workers with no constraints, fire at will, not pay almost anything, no commitments to employees), it wants money to subsidize what should be its own investment, but nothing that will help the average person....so it is not going to happen, even though you are right, such a move would actually stimulate the economy more than anything else. Moreover, this could even be guaranteed if the money, issued as, for instance, vouchers, had a time-limited value.

The fact is that if it were tried, it would do more to stimulate the economy than anything else that has been tried. However, it will not be tried due to political pressure by business groups. And so it will go on, business groups arguing against any measures that will help their ultimate consumers, but then complaining if any attempts at stimulus do not go into their own pockets, and then further complaining about the precarious state of the economy for not investing.

0 ( +2 / -2 )

I'd say Abe should look for some other advisers!

Printing money and spending money that you don't have just doesn't work!

2 ( +2 / -0 )

Unbelievable that this type of "solution" has become an almost normal part of the daily discourse about the economy and policy.

5 ( +5 / -0 )

Wakarimasen

Unbelievable that this type of "solution" has become an almost normal part of the daily discourse about the economy and policy.

Except that WW2 was the world's largest ever stimulus package. The money that everyone claimed did not exist back in the thirties suddenly existed (all it took was the excuse that our societies were under attack). However, regardless of the causes, it caused government spending on an unprecedented level (I am talking about North America here - since Europe and Asia also had the task of reconstructing what had been demolished) and it pretty much got back full employment and 30 years of growth...so it does work.....if the goal is to help the population rather than the wealthy classes.

0 ( +2 / -2 )

I want to see interest rates increased to several percent. I don't have any debts and I'm trying to save for retirement but it's difficult to get a good return. If interest rates were higher I would be able to spend more, but with things as they are I have to save as much as possible.

2 ( +2 / -0 )

Ideas of cash handouts or coupons don't inspire me.

I personally have received in excess of 250,000 yen in cash from government this year for various reasons, but I didn't spend an equivalent amount extra as a result. The notion didn't even occur to me. (Maybe I am unusual?)

Furthermore, if I knew the government were giving everyone huge amounts of money, I'd exchange my share for foreign currency or other forms of money as fast as I could, rather than spend that mickey mouse yen on something that I wasn't otherwise going to buy. Of those Japanese people who maintain faith in their currency, I think most of them would probably just save it.

Coupons and vouchers are worse than useless if they can be used as substitute for cash. If you put a time limit on my voucher, I'd stock up on beer and other stuff I typically consume anyway, merely burdening the seller with the extra process of redeeming the voucher, and then I'd not be buying extra stuff for a while because my attic and basement would be fully stocked. So you might see a fake economic bounce like before the consumption tax hike, but it'd be paid back later.

Methods that bring forward consumption are not the same as the stimulating new consumption. What the economy lacks IMO, is not sufficient money, but new real value creation. It's an increase in economic activity that is required for growth. Adding zeros to people's bank balances doesn't mean you'll get extra economic activity (conceivably you'd actually get less).

1 ( +1 / -0 )

Surely what's needed to fix the economy is to MAKE money.

A strong economy is built upon the foundation of making money. One must of course spend money, but the spending of that money must create a surplus which can be used to finance ways to make more money. A business doesn't spend all of it's profits on bonuses or higher salaries, it spends this money on increasing the size and scale of it's business, and as this scale increase, so can bonuses and salaries. In the end, economic prosperity and growth are all about positive returns. For every 100 yen a company spends, be it on labor, research and development, or building a new office, it expects more than 100 yen in return. And anything above the 100 yen spent will be reinvested to earn further returns. This is how economic growth occurs.

But the public sector does not generate a positive return. For every hundred yen it consumes, it provides less than 100 yen in benefits or value. This loss could be covered in a strong economy which generates enough excess revenue to cover it. But with the public sector now consuming vast amounts of GDP, and providing far less in return for what it consumes, it is dragging down the private sector, diminishing returns to negative. It is becoming less and less possible to earn more than 100 yen on a 100 yen investment.

And these stimulus packages don't help, because the amount of positive economic activity they create is less than what they cost. In a country where the nearly all materials and energy are imported, and were the most food is imported (and were domestic consumption still accounts for more than half goods and services sold), a weak yen is more of a curse than a blessing. And in an environment with a declining population, decreased consumption, profits, and wages, the only way people can keep their heads above water is with deflation. This deflation raises the value of people's wages and savings when getting a raise in pay, or earning interest on deposits is not possible. These stimulus spending packages are robbery of the taxpayers, and nothing more. They steal 20 trillion yen, dole out perhaps half that amount, and the rest vanishes in the bureaucracy.

Right now, demographics are driving down consumption and wages. And if the government is trying to create inflation in this environment, it harms everyone, including the government itself. Mr Fujii thinks the way all politicians do, that the solution to any problem can be found by spending someone else's money. And now Japan's corporations and stock markets think the same way, because without constant central bank intervention in the form of currency manipulation, interest rate manipulation, and endless QE and stimulus spending, they cannot keep their ships afloat. But the more the central bank intervenes, the deeper the water gets, and the further they will sink when they collide with the icebergs of economic reality.

2 ( +4 / -2 )

Ok. First observation. An economy does not consist of one individual. Just because one person does something does not mean anything. Over a large enough population, you will have all kinds of interactions, none of which alone will change anything, but cumulatively will change patterns of behaviour.

Even if everyone did go out and buy beer....for argument's sake, the breweries would have to start expanding production. As long as the increase in production could be handled by existing infrastructure, the effects would be limited. Yes, you would have to hire some extra workers, but that would be it. But, if you expand it enough that infrastructure has to be increased, then you also start creating construction and manufacturing jobs (for the equipment to brew the beer).

And we have not even touched upon the distribution networks that would have to expand. If everyone did go out and buy beer, chances are supply chains to the stores you buy the beer at would have to be increased.

If this drives down unemployment, and it will one way or another, it will become increasingly an employee's market. Do you think Walmart started increasing salaries and benefits out of altruism? Of course not. They started having increased turnover as other jobs became available and people moved on.

And it still does not invalidate the argument that spending money stimulates the economy, as long as workers are seeing the benefits. WW2 was a fiscal stimulus on a historic scale. It brought down unemployment and increased living standards for decades.

As for the argment that making money is the foundation of an economy, that is silly, unless the money is put to productive use. I can collect a lot of bills with the nice digits 100 or 1000 printed on them and then put them under a mattress. How does that help the economy? It is not going to create a demand for a worker to provide me a product or service....

The stimulus packages do not help because most of them focus on giving more of these coloured notes with the digits of 100 or 1000 to those who already have big bank accounts. Same as putting them under a mattress.

2 ( +4 / -2 )

Just take lots of drives in the country. There are amazing bridges everywhere even connecting the smallest towns. Stimulus is okay, but they need to spend it on something better than more super duper bridges. in places where nobody wants to live except old folk on pensions.

2 ( +2 / -0 )

If the economy grows faster as a result of government stimulus, this would lead to an increase in tax revenue, which could be used to pay off government debt later, Fujii said.

And if my grandmother had wheels, she would be a bus.

3 ( +3 / -0 )

fjlm44, sangetsu03 and fxgai, take a bow chaps (chapesses?) I love reading the stuff from you guys and being educated.

Can't you 3 get together and run the country, you'd do far better than the ones we have now in charge!

0 ( +3 / -3 )

Since we're asking, can I get $1 million? Makes about as much sense

0 ( +0 / -0 )

Since we're asking, can I get $1 million?

Sure, you can have a million. But keep in mind that it must be paid back, and at interest. But even as low as interest is right now, it is considerable on such an amount. And it is far more considerable on 20 trillion yen.

Give me a million, and I can can double it in 3 or 4 years. Give the government a million, and they can lose all of it in a matter of hours.

And it still does not invalidate the argument that spending money stimulates the economy, as long as workers are seeing the benefits. WW2 was a fiscal stimulus on a historic scale. It brought down unemployment and increased living standards for decades.

You have to take demographics into account here. After the war the world's population exploded, along with demand, and the addition industry and employment to meet that demand. Keynesian economics are indeed workable provided that a foundation for growth exists (as it did in Keynes' time). Such a foundation does not exist in Japan. Japan has no material, agricultural, or energy resources. Fiscal stimulus in Japan has not been implemented to cause economic growth, because Japan's current political, industrial, and business structures are all burdens to growth. With these burdens pushing up the cost of living and simultaneously pushing down consumption and population, growth is not possible. Fiscal stimulus in Japan is mainly for life support of the political, industrial, and business structure. Since genuine economic growth and increased demand are demographically impossible, Japan is borrowing from future generations to pay for it's current prosperity.

As for the argment that making money is the foundation of an economy, that is silly, unless the money is put to productive use.

Money is not the foundation of an economy, value is the foundation. Labor has value, products and services have value. Money is merely a tool for exchanging or storing that value. The government can create more money, but it cannot create more value. And the more money the government creates, the less value that money can exchange or store.

I can collect a lot of bills with the nice digits 100 or 1000 printed on them and then put them under a mattress. How does that help the economy?

It doesn't help the economy, but neither does spending it all to buy Haitian penny stocks. More than anyone else, a company or business knows the value of money, and understands far more than you that money which is not used is useless. But they also understand that spending or investing money in an environment which cannot provide a positive return is worse than holding onto it. Companies earn the money they have, and their first and foremost goal is to use that money to make more money.

Many companies in Japan have been waiting for Abe's third arrow. They have taken advantage of zero rates, and QE to borrow vast sums of money, which they have used mainly to buy back stocks. This has caused a huge increase in stock values, not to mention returns on these investments. They have done this in expectation of fiscal reform and deregulation of the economy, neither of which have happened. So now they are stuck with the debt they issued to buy the stocks, and large stock portfolios which will be worth less than the paper they are printed on if the economy fails to grow. And this is why the stock market is now entirely dependent on central banks continuing to keep rates at zero, and to keep printing money. Unless Abe gets off his backside and enacts the reforms he promised, the current bubble will explode far more messily than the previous one did.

3 ( +3 / -0 )

The parasitism continues. Ginza tonight, boys!

0 ( +0 / -0 )

@sangetsu03

I agree wholeheartedly with what you say. The reason for wanting inflation is that the value of money increases (in terms of purchasing power) by holding on to it when there is deflation. By increasing inflation, you are forcing companies to figure out ways of going out and looking for productive uses for this money in the bank account. Given that your capital investments (machinery, tools, etc) will have to be replaced due to wear and tear, in an inflationary period you might as well go out and invest the needed amounts before your cash reserves lose their value.

I agree with accumulating cash is not more useful than buying Haitian penny stocks. But it is one of the limitations of QE. Most of it goes into purchasing bonds which puts money into those who already have cash reserves, who then go out and invest it into more equity (shares) which drives up the stock market (which may be good for pensioners) but does not do much for the economy.

That is why a stimulus package should target those who will go out and spend it on things that will stimulate the economy. Say, all households whose income is less than 2.5M yen for singles and 3.5M for families (possibly adjusted for regional variations - on 3M you do nicely in Kumamoto but not so much in Tokyo). I can assure you that a single mother on 2.5M who gets 100k or 200k, either as cash, or vouchers, will go out and use it, whereas someone on 10M will likely take whatever they get and put it into the stock market (in all likelihood). Apart from making these people's lives easier, there is a very high probablity that they will make use of it. It could even be something as frivolous as 100K to be spent on lodging and transportation for a weekend getaway....to be spent over a 6 month period (in case people are concerned that this would only be saved away rather than put to use). First, in the situations I mentioned, less than 2.5/3.5M PA, the people are not likely to have much money to spend on a holiday but it

As for the population shrinkage, I agree. Viewed in this context, Japanese economic performance is actually quite respectable, when it is on a per capita basis (adjusted for the size of the working population). But I can also assure you that employment stability and the ability to plan makes a big difference.

I came back to Japan a year ago, on the basis of a 'haken' contract, just to see what the labour market is like and also to refresh my Japanese, which I was forgetting rapidly, after 7 years since my PhD, and I can tell you that most of my decisions are made on the basis of possibly moving on (so why spend a lot of getting too comfortable? What if I move? etc. I could get a car, but public transport in this area, while not great is better than in the UK, why spend money on it if in a year or two I may decide I have had enough and move on - and if I did not have that option, in case my income stream was interrupted). The irony is that it helps Chinese and Vietnamese manufacturers more than Japanese ones, as I purchase the cheapest...why spend a lot if you may move around and then moving it with you becomes expensive?

Of course, as I have argued before, one person does not make an economy, but my own example illustrates the pressures you put on people when put into these precarious situations (ok, my income is quite decent, but then I have a PhD - and it would be even better if it was a permanent position - but then I always have the option of heading back to Europe or Canada so I am under less stress than a Japanese person).

1 ( +1 / -0 )

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