politics

Abe expected to announce election, sales tax hike delay on Tuesday

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"Economists have for years said that Japan needs to increase the consumption tax to reduce its enormous national debt."

And I say Japan needs to cut its government spending below what it takes in to reduce its enormous national debt which is the result of reckless government spending over the years.

9 ( +9 / -0 )

Economists have for years said that Japan needs to increase the consumption tax to reduce its enormous national debt.

And likely that is a big reason for calling an election. Abe is a politician, and he knows he can be voted out and lose his job if he continues with this stupidity. Meanwhile the "economists" at the MOF and BOJ giving him "advice" would continue showing up in their empty suits collecting their fat salaries while they trash the economy with their idiotic obsolete dogma. An election win will give Abe some protection against the fools at the MOF.

But the earlier tax hike discouraged consumer spending...

No, it didn't "discourage" consumer spending, it eliminated consumer spending. Taking money out of peoples' wallets because you are too stupid to understand how the financial system works and that the "national debt" is also the national money is Dark Ages level ignorance, and the effect was completely predictable.

7 ( +8 / -1 )

A no-brainer. The tax hike would have been a disaster for him politically and also for Japan economically.

5 ( +5 / -0 )

Agreed..........We need the people to talk about cutting government spending - when governments talk about raising taxes.

6 ( +6 / -0 )

In the 25 years that Japan has been in a recession, the main reason that it has been so prolonged is that govts have not taken the tough decisions to reverse the situation.And the wimping out by Abe in the increase is indicative of a typical PM in Japan.Abenomics is clearly damenomics.

3 ( +3 / -0 )

I'm Interested to see how the DPJ will play this one. The Tax is monumentally unpopular - and voters have not forgotten that the law was passed by Noda's government.

-1 ( +1 / -2 )

"Economists have for years said that Japan needs to increase the consumption tax to reduce its enormous national debt."

Yeah, and they've been wrong. Only the neo-classical "e-wrongimists" have been saying that. The ones who have been right, like Paul Krugman, have been saying the opposite. You simply can't stimulate a fragile economy and raise everyone's taxes at the same time..

Perhaps the e-wrongamists can tell us exactly, in specific evidence-based terms, how the debt is currently damaging Japan's economy?

0 ( +2 / -2 )

If the government took some bold steps in stopping frivolous spending, the tax hike would be acceptable (perhaps). But as the government continues to spend all it takes and some, of course its unpopular.

1 ( +2 / -1 )

Cut government spending? Bad idea. Who is going to pay for all the super-companions coming to this year's bonenkai if we cut government spending?

1 ( +2 / -1 )

Abe is dammed if he does and dammed if he doesn't, he will be voted in, and he will defer the tax increase, japan will not reduce its spending, the world will still spin and the sun will still rise. People will still breathe and spend.

So long as the yen is weak japan has a chance, tourism, exports and technology are the way forward.

-3 ( +2 / -5 )

Abe also wanted to put a national election behind him before he pushes unpopular bills such as those related to expanding roles of Japanese military, Kyodo News said.

That makes the most sense and I'm surprised the media haven't been talking about it more! But this article did forget to mention Abe's most important item on his agenda and that being scraping the "Peace Constitution" ( 平和憲法 Heiwa-Kenpō) also referred to as the "Postwar Constitution" ( 戦後憲法 Sengo-Kenpō) and replacing it with one he has waiting in his back pocket already for his administration to send through in a national referendum then have it rammed through the diet before anyone had time to digest what had just happened.

0 ( +1 / -1 )

This is stupid. He already has public support to not raise the tax. 70-some percent of the people don't want him to raise it. He's just going to waste a bunch of money on an election.

2 ( +2 / -0 )

Just in, Japan's real GDP shrank 1.6% on an annualized basis.In other words, Japan's economy has slipped into a recession in the third quarter.

So the unpleasnt economic data leave Abe little choice but ... That's sad, isn't it.

3 ( +4 / -1 )

safeguard fragile recovery

Eh? Really? When was it?

1 ( +1 / -0 )

From my study what I found that "Sales Tax hike is inversely propositional to Birth rate". If Tax rate will go up Birth rate will fall down. "Sales Tax hike is proposed, to pay the pension of elderly". And the who, who are paying this tax, are not able to decide their own future. As Sales Tax hike is inversely propositional to Birth rate, Japan will not see much younger generation in 20 years from now, and who are in their 20's now will be the victim of "Sales Tax hike is to pay the pension of elderly" condition after 20 years. So after 20 years, the one who born this year will see the generation in their 40's and will think these will be their future, so they will learn English and flee the country.

2 ( +2 / -0 )

Just in, Japan's real GDP shrank 1.6% on an annualized basis

Yeah, that was a shocker, surprised me for sure. I had been more optimistic than others on Japan's economy, but it looks like it is a complete basket case, as the ultra pessimists have been making out.

And I say Japan needs to cut its government spending below what it takes in to reduce its enormous national debt which is the result of reckless government spending over the years.

If that's to be the case, it would mean slashing spending of around 75 trillion yen (not including debt servicing costs) to below 25 trillion yen, and enacting the enigma "third arrow" reforms.

Sorry old folks, but Japan can't afford your pensions, and you'll have to do with just a third instead. And that's just the start of it.

you are too stupid to understand how the financial system works and that the "national debt" is also the national money is Dark Ages level ignorance

That kind of thinking only works in a place called "la-la" land.

Perhaps the e-wrongamists can tell us exactly, in specific evidence-based terms, how the debt is currently damaging Japan's economy?

The enormous debt misallocates Japan's scare resources into unproductive parts of the economy and creates a huge incentive for precautionary savings amongst consumers.

While Japan has been racking up enormous debts, Japan's nomimal GDP peaked in 1997 above 500 trillion yen, while tax revenues peaked back in 1990 at 60 trillion yen. This is the result that accumulating the worst government debt position in the developed world by far has achieved.

3 ( +4 / -1 )

Abe may have bought himself a little more time - but not much

-1 ( +0 / -1 )

"The enormous debt misallocates Japan's scare resources into unproductive parts of the economy and creates a huge incentive for precautionary savings amongst consumers"

The last time Japan massively and grossly misallocated its resources was in the lead-up to the 1991 bubble. The destructive funding and spending was done wholly by the banks and private businesses, not the govt, such as the purchase of the Rockefeller Center, Van Gogh masterpieces that were incinerated, and golf courses in the US desert.

The govt funded bridges and roads, some of which werent always necessary, but hey, they were bridges and roads, not ego-enhancing status symbols.

-1 ( +0 / -1 )

The last time Japan massively and grossly misallocated its resources was in the lead-up to the 1991 bubble.

Yeah and it did back circa WWII too - so what?

Old history is no excuse for the government to continue to misallocate Japan's resources every single year.

The govt funded bridges and roads, some of which werent always necessary, but hey, they were bridges and roads

Those useless bridges and roads require unkeep, and as a result drag on the economy, rather than boost it's productive capacity. (These structures are often an eye-sore as well, diminishing Japan's tourism potential.)

-1 ( +0 / -1 )

"Those useless bridges and roads require unkeep, and as a result drag on the economy, rather than boost it's productive capacity"

Who is paid to do the "upkeep"? Private construction and civil engineering companies, who then pay wages to their workers, who then spend their money on the economy and dont have to go on welfare. Ronald Reagan used the same Keynesian approach vis a vis record US defense spending in the 1980s.

In Japan, this kind of public spending has been necessary ever since 1991, when the banks and corporations inflicted so much wealth destruction that the economy was unable to recovery on its own.

As for your "efficient allocation of resources" argument, another legacy of the pre 1991 era was investors buying properties...and then keeping them empty -- in anticipation of their price rising. I've even known idiots who did this. When the private sector starts to engage in such shenanigans, it's no wonder the govt was required to step in to provide some more senseable capital investment.

-3 ( +0 / -3 )

Abe is smart politician: first he creates a “problem” namely the tax hike that electors implicitly supported as a part of the plan they voted 2 years ago and he also creates the “solution” namely his plan to postpone the tax hike …

This way he could exploit this situation to improve his position in the Lower House ...

-1 ( +0 / -1 )

It is too late, the damaged already done and it is time to say sayonara さようなら!

-1 ( +0 / -1 )

JeffLee,

Who is paid to do the "upkeep"?

People who's labour could be put to productive use in places besides where some overpaid, overpampered bureaucrat decides to apply them, so as to eat through a budget before the end of the fiscal year. Opportunity cost? ROE?

According to you for 23 years the government has had to be doing what it's doing because banks and businesses are clueless and destroy growth, yet Japan has still been stagnating inspite of the government's "good work", borrowing and spending and "sensibly" allocating resources.

The model you espouse is useless, a failure, and undemocratic.

-1 ( +1 / -2 )

Who is paid to do the "upkeep"? Private construction and civil engineering companies, who then pay wages to their workers, who then spend their money on the economy and dont have to go on welfare. Ronald Reagan used the same Keynesian approach vis a vis record US defense spending in the 1980s.

Except that in Reagan's day, the American population was growing strongly, and there was lots of room for innovation and reform in the American economy. America's tech industry also began to bloom during Reagan's time. Comparing Reagan's economy to Japan's current economy is like comparing a watermelon to a lime.

You seem to put the cart in front of the horse when it comes to determine the source of revenue. It is the private sector that provides nearly all of our jobs, nearly all of our pay, and which provides the government with operating revenue via the taxes the private sector pays. The private sector uses labor, innovation, and other means to create a return on the money which it invests and uses.

On the other hand, the public sector generates a loss on every investment it makes. How much will will you get back from your national pension after paying into it for 25 years? Thirty or forty percent? My pension plan will pay me back much more than I paid into it. Of course, I am still forced to pay into the national system, and they will reduce their payments to me to compensate for what I get from my private plan. And every other government project or scheme works the same way. Most of the money is lost in administration costs, graft and kickbacks, or simple incompetent planning.

Need and example of how well the government manages economic matters? Just look at the numbers published yesterday. Not a single prediction of GDP made by the government was close to being correct, was it? But I work in economics myself, and I published my own predictions last year. Mine were accurate.

-1 ( +2 / -3 )

"America's tech industry also began to bloom during Reagan's time."

That's a howler. It bloomed in the 90s, with the advent of the web, iMacs and windows 95. The Japanese dominated electronics throughout the 1980s, while US companies like RCA went bust..

"It is the private sector that provides nearly all of our jobs, nearly all of our pay...",

The problem is that it doesn't. Maybe in China, because multinationals are now busy transferring Western and Japanese tech and manufacturing to the Chinese, basically handing our expertise to Beijing on a plate. Long live communist dictatorships!

-1 ( +0 / -1 )

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