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© KYODOJapan's FY2021 budget to hit record high of over ¥102.66 tril
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fxgai
Incredible numbers.
Think about that.
Before there was coronavirus, they were spending 100 trillion yen a year, even despite tax revenues being just 63.5 trillion - when times were “good”.
Spending 36.5 trillion yen more than tax revenues, when times are GOOD. Not bad like they are this year, when most would be happy to look the other way and make up for it later.
But Japan is spending it all well above that, and there is no hope to make up for it all later, unless it is much, much, much later in another completely different era of history.
And nothing has been done to make this system fundamentally sustainable. At some point, it’s going to let people down because the can has been kicked down the road.
Or, “more than half of annual tax revenues”, or “completely financed by deficit spending”...
Does it make sense that so many are supposedly dependent upon the government in this way?
If financial conditions change at some point (...hmmm), then what for all this borrowed money equivalent to what is spent of social security?
What is going to give?
JeffLee
@fxgai
There's lots of "hope." Nearly half the "debt" is being held by the Bank of Japan. Just let those bonds mature, at which point the "debt" disappears. Or just cancel the bonds.
fxgai
At maturity the Ministry of Finance has to redeem the principal.
That would leave a big hole in the BOJ, the credibility of which backs the yen.
We can try this idea out, sure! Maybe it would all go unnoticed.
fxgai
heh, who wants some new Japanese government debt, the day after they cancel on the BOJ?
kurisupisu
When taxes start to rise even more than now, then people will start to take notice...
JeffLee
@fxgai
People and financial institutions who have lots of yen cash and need to park it somewhere. and the Boj, of course.
To whom? Itself? In any case, it's a stroke on a keyboard and little else.
Every warning over the years about the BOJ's "credibiilty" has turned out to be fantasy. In the real world, the yen remains a major global safe haven.
fxgai
The day after the government debt is cancelled, you think people want to own some? Suit yourself, but I'd switch completely to foreign currency savings myself, if that happens, although I do believe it is merely an MMT fantasy.
The MoF pays the owner of the bonds the money borrowed back at maturity, which in this scenario is the BoJ (although they have to figure out how to cancel on just the BoJ and not other bond holders too, or an even bigger ooops).
and the coronavirus is a hoax too right.
(Well, the story is far from over but) therefore you extrapolate that the MoF cancelling the debt owed to the BoJ would not be a problem of any sort?
May I have my "free lunch" please?!