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BOJ tries a little learning where a mound of money failed

By Leika Kihara

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While I agree that financial education is far too often overlooked, who is going to teach it? The teachers are as ignorant as most people on the subject.

Even when it is taught, most people have a hard time overcoming emotions and impulses involving money. Still some education is better than none.

The real problem though is that the government has created uncertainty for the future, and that will continue as long as they try to control the economy with their shenanigans. Let the house of cards crash (there is no way round it now), get the government out of the economy and business, and watch the people flourish. It's that second step (getting the government out of the way) that is the most problematic.

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There is little logic in the BOJ's argument. If the people save their money rather than put it in the stock market, the money still gets used, as the banks loan it out to businesses and individuals. These businesses and individuals would then use the money to buy a home, a car, new machinery, or a new building. It is not necessary for savers to spend their money or invest their money in the stock markets as in normal circumstances banks would be doing more or less the same thing.

The problem is that Japan's economy is stagnant, and there are few borrowers for the money held by the banks. With the population falling, demand and consumption falling, and more than 8 million vacant buildings around the country, there is no demand to create or enlarge businesses, or buy a new home.

This problem is caused by Japan's over regulated and overpriced economy, which has made prices artificially high. The natural reaction to overly high prices is reduced consumption. The most expensive thing in Japan is food. A baguette in a grocery store runs 200 to 500 yen, plus tax, compared to 80 yen at Monoprix in Paris. Milk, butter, and cheese costs more than double what it does in America, beef costs 4 times as much. Then you can add the costs of things like gasoline tax, road tolls, and other regulatory costs. Last, you can add price fixing. It costs double for a movie ticket in Japan than in America or Europe, Japanese electronics cost more in Tokyo than they do in New York.

The BOJ is helpless to combat the problem of deflation, because it is not caused by a lack of currency, but a lack of demand. Demand will remain low, and deflation will continue until prices stabilize at a level which people are willing to pay for goods and services. But the government is doing nothing at all to address Japan's overpriced economy, the trade reform and deregulation promised by Abe have not taken place. Until the problem itself is taken care of, rather than the symptom, things will not improve.

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When the economy gone bad and I lose my job do I get millions of yen of bail outs like big corporate CEOs ? No ? Then I'll continue saving 50% of my salary, k thx bye.

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@sangetsu03 You said it all right. I have been explaining this for ages to our friends in academy and unfortunately there is little appreciation for it. Those in business also use the same traditional trap of making a potential customer pay as much as they can make him to, to increase spending! The existence of these traps is also scaring some customers away from the market.

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Mandate a national minimum wage of 1,500 yen and enforce limits on working hours at the current level of 44 hrs/wk, to to be be phased in over 3 years. Putting more money in the pockets of those likely to spend it rather than save it will stimulate the economy from the bottom up. Provide tax incentives for companies that meet the goals early, and penalize those who fail to do so.

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Mandate a national minimum wage of 1,500 yen and enforce limits on working hours at the current level of 44 hrs/wk, to to be be phased in over 3 years.

This doesn't work. 90% of Japanese employers are not large companies, but small businesses and shops, who have little enough as it is to meet their overhead. These businesses and shops have seen their sales and profits tumble with the decline in the population. It is no good to mandate 1500 yen per hour and 44 hours per week when the businesses close because they can't afford to pay for it. Take a look at all the shuttered windows in the suburban shopping districts, the abandoned resorts and amusement parks all around Japan, and tell me that what you propose is possible.

Raising the minimum wage has never in history raised the quality of life of minimum wage earners, because the raise in wages is either negated by a decrease in hours and headcount, or increased living costs as prices are increased to compensate for the higher wage. Wages do not drive demand, demand drives wages. This has always been the case, and it always will. So long as demand for goods continues to decrease (which is inevitable, so long as the population declines and ages), so will consumption, profits, and wages.

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