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Japan passes record Y95.88 tril budget

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Money comes money goes where it stops nobody knows! Especially the Tax Paying Public Citizens

-1 ( +0 / -1 )

Japan's future could be very rosy contarary to what many Debbie downers on this thread are saying.

Since the property and stock market bubble of 1991, Japan has been facing pro long recession and ever rising debt. Successive politicians used to say that Japan future could be very rosy. It is misleading and sugar coated promise for winning more votes. Japanese people have been conned by successive politicians with unrealistic fantasy.

Japan will never get back the good old days of 1970s and 80s. Like human when the economy has matured, it will never regain the growth, energy and youthfulness of past. Even getting one percent of GDP is the touch struggle in the highly competitive global economy.

As Japan has been integrated with global economy, Japan is more prone to all external shocks such as EU debt crisis, US Sub Prime Crisis and Arab spring of middle east instability. As a resource poor nation, Japan following the trade sanction of Russia as G8 member is more painful for Japan instead of other way around.

Without taking risks, there will be no more growth. However taking excessive risks will make Japan as highly vulnerable for capital flight. If Japan has lost the credit rating, future borrowing cost will be very high. Abenomic is not the brand new policy. It has been tried and tested before. It can make short term boom. However it can not make sustainable growth and balanced budget.

0 ( +1 / -1 )

Sixteen Tons. That's the song Mr Disillusioned.

Mr Abe, assumedly well-intentioned, is just re-attempting the re-branded failed policies of the past and expecting different results. That has been defined as insanity.

-1 ( +1 / -2 )

Also, trade surpluses or deficits mean nothing unless taken into consideration with factors of why there is such a surplu or deficit. Unfortunately, they only show us 1 number on the news and that is supposed to tell us everything. But you could have an economy that is forced to import because they can't keep up with demand for parts for something they make to sell domestically. In this example you could have both a trade deficit AND economic growth. Conversely, you could use technological gains to streamline efficiencies and get trade surpluses while unemploying people resulting in a shrinking economy. Now it's true Japan's current trade deficit is bad due to increased energy costs, but simple competition from US shale gas and methane hydrate development will drive down prices overtime.

There was a positive breakthrough for nuclear fusion last month, and both France and Japan are two of the largest investors in this field. Japan's shrinking population could all of a sudden be a blessing if a few key technologies came on line in time. Japan's future could be very rosy contarary to what many Debbie downers on this thread are saying. The key to such a future is actually surviving the political turmoil of the region in the next few years.

0 ( +2 / -2 )

Economic debates are hard to tease out when only armed with some of the details, and I don't claim to have all of them, but... As an example, Trickle down economics would work if rich people could only invest within their nation. This isn't enforcible in Japan, but I am both moved and my confidence in Japan being a special case is reinforced when there are companies that will be coaxed into raising base pay on a leap of faith that, that is what needs to be done for the good of everyone. Money needs to circulate to be effective, so you can't just take an example where money was printed, and the first ones to get their hands on it sent it off to an offshore tax haven and point to that and say "you see! That's why printing money just increases debt." I don't know of many Japanese that want to retire abroad, and as long as that trend continues, the debt is actually an asset because 93% is owed to Japanese bond holders internally. Japan can always print more money. And as long as it doesn't cause so much inflation that nationals move abroad with their assets, then Japan can pay back their debt slowly.

1 ( +2 / -1 )

Bizarre how they keep borrowing and spending and JGB's haven't tanked yet. But the y will.....

0 ( +2 / -2 )

BNlightened, that's exactly my point. Japan could keep playing that game as long as they had a large trade and account surplus. Without that, the game is up. Japan will have to face the music with foreign investors to make up for the large differences. And the foreign lenders won't be kind to Japan when its debt ratio is rapidly approaching 300 percent.

-8 ( +0 / -8 )

"Japan's projected primary balance deficit, the shortfall between what the government takes in and what it spends, APART FROM DEBT SERVICING, is EXPECTED to shrink by 5.2 trillion yen to 18 trillion yen." (emphasis added)

Yes, and Abe promised the Japanese people two years ago that he "expected" Japan to be growing at 3% per year. How did that "expectation" work out again? Or right...another Abe "expectation" retroactively downgraded...to make way for even rosier expectations! Promises, promises...Abenomics in a nutshell!

It's priceless how "debt servicing" is erased from all economic discussion by the LDP...as if it didn't even exist. (More than a quarter of every yen the Japanese government spends presently goes to SERVICE previously borrowed money.) So many people like to go on about how Japan's debt is domestic, but most economic analysts believe that it is this very debt itself which is sustaining the deflationary depression in the first place!

Most analysts also believe that a country should be considered in serious fiscal trouble when it's debt surpasses 80% of GDP, yet people here shrug off the fact that Japan's debt to GDP ratio is over 200%...with huge borrowing and extra-budget "supplementary spending" set to continue into the future!

As for the economically illiterate here who claim that Japan's move from huge historical trade surpluses to huge trade deficits are nothing to worry about, you are sadly mistaken. I don't have enough room here to explain what you're lacking in your analysis, but I do recommend you read this balanced assessment of Japan's fiscal and economic problems here:

http://blogs.cfainstitute.org/investor/2012/04/19/the-japanese-debt-crisis-has-japan-passed-the-point-of-no-return/

It's a bit old (pre-Abenomics) but if anything, the course Abe and the BOJ have plotted since taking office only serves to exacerbate, not alleviate, the ongoing and well-documented move into national fiscal insolvency. In sum, Buckle up, minasan! You're in for a wild ride!

-4 ( +1 / -5 )

chucky If Korea's economy is so good and Japan's bad, please don't send Japan so many Korean prostitutes (50,000) and don't count on Japan for financial assistance.

-2 ( +0 / -2 )

nigelboy, so? There's nothing new from your links. Shrug. Those are minor problems when you compare to the problems Japan has. Read the IMF reports. Most of that is due to declining real estate assets which effects everyone from mortgage borrowers to construction and retail industries. That has hit bottom, and is now going up with economic recovery not just in Korea, but in the West. When people start selling their houses again because the value goes up, their debts will also reduce.

They're only minor because Korea is insignificant in terms of global economy. And no. Declining real estate value is a major problem to any countries especially where mass default is involved.

What IMF report are you referring to?

3 ( +7 / -4 )

nigelboy, so? There's nothing new from your links. Shrug. Those are minor problems when you compare to the problems Japan has. Read the IMF reports. Most of that is due to declining real estate assets which effects everyone from mortgage borrowers to construction and retail industries. That has hit bottom, and is now going up with economic recovery not just in Korea, but in the West. When people start selling their houses again because the value goes up, their debts will also reduce.

-7 ( +1 / -8 )

Japan, the way they're going may soon need help from Korea to buy their debt. Does that answer your question about Korea?

If the trend is unchanged for another decade and there are no natural disasters or wars in both Japan and ROK, Japan will be new Greece of Asia and ROK will become Germany of Asia which will help Greece.

-3 ( +0 / -3 )

Sorry nigelboy, but are we discussing Japan in this thread, or Korea?

A country that is mirred in a recession (consumption decline) could very well have a increased trade surplus for it's simply a resukt of their decrease in imports could well exceed the increase in exports.

Sorry dude, but S.Korea wasn't mired in recession last year, their growth rate was 3 percent, and projected to be 4 percent this year. Nothing to crow over, but it as still twice better than Japan's growth. If the current situation continues for the next 6 years, experts calculate Korea's per capital nominal income will overtake Japan in 2020. If Japan somehow recovers, it still will not prevent Korea's overtaking Japan in per capital income in 2030. Korea's household debt is mostly tied to decreasing real estate prices (mortgage holdings) which are now starting to recover. Korea racked up $71 billion account surplus last year, more than twice Japan's despite having much smaller economy, mostly due to increased value of exports. Korea has been a creditor nation for 15 years now, thanks to record account surpluses plus strong foreign reserves position, and holding more foreign assets than debt. Japan, the way they're going may soon need help from Korea to buy their debt. Does that answer your question about Korea? Now can we get back to discussing Japan?

-5 ( +1 / -6 )

Sorry Chucky. It's you who doesn't get the simple concept that trade imbalance doesn't mean you are losing wealth or increasing trade surpluses mean you are gaining wealth. A country that is mirred in a recession (consumption decline) could very well have a increased trade surplus for it's simply a resukt of their decrease in imports could well exceed the increase in exports.

So again, with all those account surpluses that Korea is experiencing, where is it going to considering Korea's household debt is at an all time high? Is Korea a net creditor thanks to the record account surpluses?

1 ( +6 / -5 )

Both nigelboy and tinawatanabe just don't get it. Yes, Japan's dependence on external trade is relatively low, up to now. But that's only because of decades of huge trade and account surpluses which allowed Japan to live off the credit. But those are now yesteryears. Japan no longer have trade surpluses and they are on their way to account deficits this year for the first time ever since WWII. For Japan to buy enough energy to keep their domestic economy going, either Japan has to continue to rack up the surpluses or dip into their savings. They're doing the latter, and thereby deteriorating their debt problem as well as decreasing their competitiveness. Forget where Japan was yesterday, where will Japan be in 5, 10 years based on the current trajectory? If Japan's current debasing of their currency continues, their dependence on imports will climb exponentially and very quickly.

-7 ( +1 / -8 )

The increase is seen as crucial to bringing down Japan’s national debt, which is proportionately the worst among rich nations.

For bringing down national debt, Japan needs the consistent trade surplus for many years. For getting trade surplus, Japan export needed to be competitive. One encouraging sign of Abenomic is deceasing the value of Yen. However low yen alone will not make the deep impact for bringing down the sky rocketing debt.

Japan is becoming the land of setting Sun unless land and labour are cheaper or producing best selling goods such as Iphone, samsung Galaxy and Ipad.

http://www.marketwatch.com/story/japan-becoming-the-land-of-the-setting-sun-2013-06-20

-1 ( +0 / -1 )

http://www.iti.or.jp/stat/2-011.pdf

28.43% just 4 % higher than that of U.S. 95% of JGB owned by Japanese which is essentially a wash in Japan's balance sheet which as mentioned has the largest net external assets.

1 ( +5 / -4 )

1 Japanese yen is 10.5 won now. 2 years ago it was 13.5. That's 28%. Learn some math.

I meant compared to 2008-2009. If you compare to that, it's 50% depreciation.

-7 ( +0 / -7 )

That means Japan’s national debt, now more than twice the size of the economy, will continue to rise but at a slower pace.

Is this supposed to be the silver lining? Not especially encouraging, especially for the younger folks who will be paying for the excesses of their elders their entire working lives.

-1 ( +0 / -1 )

Japan's Yen depreciated 50% in the last 2 years against the Korean won

1 Japanese yen is 10.5 won now. 2 years ago it was 13.5. That's 28%. Learn some math.

-1 ( +2 / -3 )

Japan needs energy import like thirsty man needed water. Japan needs raw materials such as steel and rare earth for industrial output . Japan needs wheat for making noddels and breads. Japan can easily boycott the Gangnam style import. Japan is very hard to boycott Russia Gas and Wheat.

That's not the point. Trade as a percentage of GDP is low hence the term "trade dependent" does not fit.

1 ( +5 / -4 )

tinawatanabe, I have already checked the official stats, I suggest you do that yourself. Japan's economic growth is barely 1 percent, if even that. Some domestic economy. rolls eyes.

-6 ( +1 / -7 )

chucky I do not make up numbers. You can easily check it with official data. And it is not only trade that can make revenue but also domestic economy.

1 ( +4 / -3 )

They forgot to mention in the article that 41.3 trillion yen (43% !!!) of the 96 trillion yen is being financed through new debt. Then more than half of the 41 trillion yen goes directly into debt-servicing. Question is how long this situation can continue like this.

0 ( +1 / -1 )

chucky Recent data show Japan's trade dependency is about 10%, Korea's about 96%. Japan is as much domestic economy as USA.

tinawatanabe, Japan's trade dependency is not 10% and Korea's is not 96%. Please making up numbers off of your head. Japan's Yen depreciated 50% in the last 2 years against the Korean won yet Japan still has a trade deficit, and soon account deficit. Japan is not a domestic economy like the USA. Japan is not a USA. Japan lacks raw materials. Any countries that lack natural resources must sell more to the outside world than they buy, more of often than not. But if they don't, what usually follows is financial crisis. The US is in a different situation because they can turn on the tap anytime and dig out all the natural resources that they can use to run their economy without buying from the world and have a self sustaining economy if they wanted to.

-5 ( +2 / -7 )

chucky Recent data show Japan's trade dependency is about 10%, Korea's about 96%. Japan is as much domestic economy as USA.

0 ( +3 / -3 )

The rapidly aging population is putting pressure on the public purse, while low birth rates are threatening to create a demographic time bomb for the heavily indebted nation.

Japanese women birth rate are so low and national debt is keep rising. There are no suffiencient new generation for who will burden the ever rising debt. Japan is Greece of Asia. ROK may become Germany of Asia for bailing out the desperate Greece of Asia.

http://www.spiegel.de/international/world/massive-japanese-sovereign-debt-could-become-global-problem-a-875641.html

And Japan isn't a trade dependent nation?

Japan needs energy import like thirsty man needed water. Japan needs raw materials such as steel and rare earth for industrial output . Japan needs wheat for making noddels and breads. Japan can easily boycott the Gangnam style import. Japan is very hard to boycott Russia Gas and Wheat.

That means Japan’s national debt, now more than twice the size of the economy, will continue to rise but at a slower pace.

The more infrastructure projects mean, the more import. The more import with less export means the more deficit. The more deficit means Abe needs more debt for completion of projects.

-1 ( +0 / -1 )

“We will try to minimize the negative impact of the increase in the consumption tax.”

How about cutting it to try for a positive impact?

@Disillusioned Thanks for the heads-up! I'll go to the shiyakusho next week to get some stuff done that needs doing!

@Farmboy Good one! But, technically deflation is bad, isn't it?

1 ( +1 / -0 )

As much as America is defective with the two parties being unable to pass a budget for months on end, I wish Japan had a little more opposition to posting the biggest budget ever, with nary a word from the opposing parties.

Two extremes, neither very good.

-1 ( +0 / -1 )

And Japan isn't a trade dependent nation? How do they pay for imported energy and raw materials if they don't depend on exports? Japan can't be like the US which have plenty of natural resources. Where have I compared Japan with S.Korea? I have not. Now that you mention it, S.Korea's account surplus is more than twice Japan's, while Japan is headed towards deficit, S.Korea is well on its way to a $100 billion surplus this year. They go straight to buying US dollars, gold, Euro, stocks, bonds - lending to other nations, turning S.Korea into a huge creditor nation which Japan used to be. There's your answer.

Import+export/GDP. No. Japan is not trade dependent unlike IMF monitored Korea. I haven't kept up with Korea's net position but are they even a net creditor?

-4 ( +4 / -8 )

A no-brainer. Just incur more public debt and pray that things will work out.

0 ( +0 / -0 )

You're comparing Japan which is not a trade dependent nation versus that of Korea. One sore point about bragging account surplus in regards to nations like Korea is that when asked where all these surpluses are going, you get no answer.

And Japan isn't a trade dependent nation? How do they pay for imported energy and raw materials if they don't depend on exports? Japan can't be like the US which have plenty of natural resources. Where have I compared Japan with S.Korea? I have not. Now that you mention it, S.Korea's account surplus is more than twice Japan's, while Japan is headed towards deficit, S.Korea is well on its way to a $100 billion surplus this year. They go straight to buying US dollars, gold, Euro, stocks, bonds - lending to other nations, turning S.Korea into a huge creditor nation which Japan used to be. There's your answer.

-5 ( +4 / -9 )

The only ones that will gain anything from this are the very rich or the very poor. The poor will get a one-off cash payment of ¥10,000 (big deal!) and the rich (5% of the population) will get ongoing support through tax cuts. Meanwhile, the middle classes (90% of the population) will get bugger all except having to foot the bill of an ever-expanding public debt. One thing that I am very curious about is, what is gonna happen to the Japanese economy from April 9 after Windoze drops support for XP. All the government agencies, banks and corporations are still running this antiquated OS. It is going to cost millions to upgrade their computers. All the ATMs in Japan run on XP. I have not heard of any solutions to this issue as yet and they have two weeks to solve it. Windoze first announced this in 2007, but in typical fashion, most Japanese corporations buried their heads I the sand and ignored it. The company I work for is closing down their network next week, but there has been no announcement as to when it will be running again and how they intend to deal with it. There was an announcement made last year that the city halls will just disconnect 70% of their computers from the networks. Good luck getting anything done at the shiakusho folks! Most of this stimulus package will be very quickly soaked up to solve this issue and nobody will actually get any benefit from it.

2 ( +5 / -3 )

Sure, that was when Japan was racking up huge account surpluses. Those days are now over for Japan which is well on its way this year of racking up a minus account deficit for the first time in decades, that's the sticking point for Japan - the new pattern. The new pattern won't change even if they turn on the nuclear power and save $50 billion a year in fossil fuel imports. The account deficits wouldn't be too bad if it isn't for the fact that Japan's national debt is almost 300% of the entire economy.

You're comparing Japan which is not a trade dependent nation versus that of Korea. One sore point about bragging account surplus in regards to nations like Korea is that when asked where all these surpluses are going, you get no answer.

0 ( +5 / -5 )

No one mentions the most important thing: Hashimoto PM increased the GST from 3% to 5 % and it killed the nascent growth 15 years ago. Abe PM's success regarding this budget will be measured by whether he can prevent the economy from cratering with this 5% to 8% GST increase.

Everything else is noise.

2 ( +3 / -1 )

Hard currency in yen versus soft currency in Won. Japan is the largest net creditor in the world for 20 consecutive years.

Sure, that was when Japan was racking up huge account surpluses. Those days are now over for Japan which is well on its way this year of racking up a minus account deficit for the first time in decades, that's the sticking point for Japan - the new pattern. The new pattern won't change even if they turn on the nuclear power and save $50 billion a year in fossil fuel imports. The account deficits wouldn't be too bad if it isn't for the fact that Japan's national debt is almost 300% of the entire economy.

-5 ( +3 / -8 )

96 trillion more borrowing, to reduce debt? Hmmm, that sounds reasonable.

I'll be sure to tell my six-year old daughter to explain this to her grandchildren when they ask why they're living in penury.

And I won't hold my breath for a single brass farthing of this making its way to families who don't work in the construction, military, arms or politics industries.

-1 ( +5 / -6 )

Japan has a huge economy that's third in the world. Now the bad news, it's mostly all debt. I really have to question the notion that Japan really is a rich country. Anyone can print "I owe you" promissory notes, spend like crazy, and live like a rich person by pretending he's rich.

Hard currency in yen versus soft currency in Won. Japan is the largest net creditor in the world for 20 consecutive years.

1 ( +7 / -6 )

Japan has a huge economy that's third in the world. Now the bad news, it's mostly all debt. I really have to question the notion that Japan really is a rich country. Anyone can print "I owe you" promissory notes, spend like crazy, and live like a rich person by pretending he's rich.

-9 ( +2 / -11 )

"Apart from debt-servicing" which is enormous. Omitting this from calculations makes a huge difference. Such creative accounting.

"Public spending projects" = corruption.

" Upgrade Japan’s defense forces" = Abe's true agenda. Note that this will encourage China to upgrade theirs. In other words, let's start an arms race.

3 ( +3 / -0 )

They should first abolish the Japanese bureaucracy's golden parachute.

6 ( +6 / -0 )

Now let's wait for supplementary budget.

0 ( +1 / -1 )

Not much of a tax hike. Non issue, really.

-4 ( +0 / -4 )

 "as consumers brace for the country’s first sales tax rise for over 15 years."

Brace?

Govt.'s package is a total over reaction in my view.

My country's govt. introduced a 10% sales tax overnight with no stimulus package.

People just took it in their strides.

Now, sales tax is 15% and economy is rocking.

-4 ( +1 / -5 )

"The increase (in tax) is seen as crucial to bringing down Japan’s national debt .... so now lets waste 95 trillion .... yeah that will work. Can knowone in Japan see how crass this government of headless chickens is?

6 ( +7 / -1 )

It might just be too little too late, hope these politicians know how to play a fiddle!

2 ( +3 / -1 )

How's that song go, "Another year older and deeper in debt"?

3 ( +5 / -2 )

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