Koike's new party unlikely to take power in election: senior member

Lots of self confidence there.

According to this mornings news program this new party is expected to field something like 210 candidates around the nation, with 130 coming from the democratic party.

Even if they manage to get 150 seats they will be a force to be reckoned with for sure!

I encourage anything to rattle Abe's cage...

As much as I dislike Abe and his cronies, do we really need a new LDP light party right now? I am disappointed that Koike's party is still pushing the Security bill that Abe passed, and the right to send troops abroad.

Maybe now, the left, whatever becomes of them, can coalesce and form a group that is not mongering for war, and restoring Japan to its glorious past, and put citizens first.

I applaud Tsujimoto Kiyomi, who said she will not join the party Hope, as it is too conservative for her, and she plans to continue to fight for more liberal ideas. But she wished Koike well, and hoped that she would help women and the ordinary citizens, the people that gov't is supposed to really care for!

I assume there is a lot a back room negotiation between members of Abe party with Koike,s Party. The writing in on the wall that the sale tax will be introduce after the election late November. It will be Abe last term. He will bring the tax in first and move onto women equality. It will be his swan song. Abe will need her party vote to bring the sale tax in. Koike party will not stop the tax but will place pressure on Abe for Women equality and use the Tax bill to promote reform for women equality. This will suit Abe legacy and nothing will be said about passing bills for Japan to take part in international Weapon Industries. while Media biggest topic will be Women equality. The weapon Industries is Abe real reform before he leaves. This will set up Koike Party to merge with some of Abe party members for the election after this.

As much as I would like to see an actual rival to the LPD succeed to make them actual realize that people don't like the majority of LDP policies, I don't think this party is the one that we should be supporting. They seem to be even more hardcore than the LDP and many of their promises will either change nothing or even make them worse, there's a few things which could be positive but overall it's like their whole strategy is that "The LDP isn't conservative enough anymore! Let's be even more radical!" No matter who wins, we all lose.

Nice caring people don't get involved in politics only self serving bloated ego people get involved. The rest of us do our bit without having to have adulation. Japan has an excessive amount of self serving morons who's sole purpose is self enrichment.

What opposition party is that if you have the same policies ?

gogogoToday  06:52 am JST

Lots of self confidence there.

It might be a different story if they had candidates for every constituency. Doesn't sound like they will.

Why is everything a farce here? This political system and election is so rinkydink.

What Japan truly needs - and deserves - is a solid center-left party.

BakabonPapaToday  10:22 am JST

What Japan truly needs - and deserves - is a solid center-left party.

There are certainly centre-left politicians so they need to get their act together.

The Japan Communist party has to get rid of the name, and their opposition to the SDF. They will never get ahead if they keep those two things. I think that Ishii is not a dumb man, but how long can he keep banging his head on the electorate wall before he realizes he has no chance. If the JCP, and the remnants of Minshinto were to join forces, that would be your center-left party. But I can't see that happening.

Also, for the love of god, get rid of these parties that only have one or two members. Make a law, rule proclamation that you must have some level of support before you can be called a party. On the news every night we are subjected to what these "leaders" feel, even though they have no say at all as to what will really happen, but time is taken away from those that need to speak more.

The Japan Communist party has to get rid of the name, and their opposition to the SDF. They will never get ahead if they keep those two things. I think that Ishii is not a dumb man, but how long can he keep banging his head on the electorate wall before he realizes he has no chance. If the JCP, and the remnants of Minshinto were to join forces, that would be your center-left party. But I can't see that happening.

That's an excellent point. They can call themselves the Japanese Socialist Party. With the rise of Bernie Sanders in the US, they would have a better chance..

Also, for the love of god, get rid of these parties that only have one or two members. Make a law, rule proclamation that you must have some level of support before you can be called a party. On the news every night we are subjected to what these "leaders" feel, even though they have no say at all as to what will really happen, but time is taken away from those that need to speak more.

Another excellent point.

@gogogo. Abe doesn't have a cage, he can do anything he wants, his group wants or America orders. The new party will be the same, but as a feminist, it would be interesting to see a women president, even if they are all basically the same group.

Definatly the communist party should name change, it's not communist just common sence, of all political partys the communist party do have policies that are beneficial for the future.

Koike opposes a rise in the consumption tax until the economy can withstand it and is against nuclear power.She also wants to cut the number of parasite politicians and their bloated salaries & allowances.These points are the opposite of LDP policies.

Good enough for me and hopefully a large portion of the electorate.

Agree 100%.

Spinning theories about how Japan needs a "real" opposition ie. centre left party is all nice and dandy but the current reality does not support it. This is a choice between Abe and his merry band of LDP geriatrics or Koike and her team...voting for anyone else just ensures LDP stays in power longer. Thats the reality of this election, maybe the liberal forces will be stronger and better organized for the next election campaign, but thats not the case now. Even if Kibo doesnt win this time, hopefully they will gain enough seats to limit Abe,s ability to push through whatever legislation he likes at a whim.

Excellent excellent post! Yes Koike may not be the most stellar choice- she is still affiliated with Nippon Kaigi and is also hell bent on changing the constitution which is troubling, but opposing nukes as well as the tax hike is a BIG difference between her party and the dinosaurs. If the tax hike goes through, Japan could very well sink into a depression.  The economy is very fragile and is limping along as it is. Not to mention the awful decision to restart the nukes and put Japan's safety on the backburner for profits.

Koike isn't great, but she's the only viable opposition for the time being. Who would you all prefer?  Abe again? Who in their right mind wants THAT?

Koike opposes a rise in the consumption tax until the economy can withstand it

It's funny. Why is it that it is acceptable for government to spend beyond its means (status quo), but not acceptable for government to spend a little less beyond its means? Those who want to hike are bad, but on this point Koike isn't any better, IMO.

The system is rigged in favour of governments that spend money that the taxpayers aren't prepared to hand over. Sounds great, until your nation of residence becomes like Venezuela.

Aly, 

If the tax hike goes through, Japan could very well sink into a depression.

Continuing with unsustainable public spending with a shrinking population of income tax payers could be more likely to result in that, I fear. 

The biggest impact I see from hiking from 8% to 10% is it becomes easier to calculate sales tax in my head. (Wish the government would just make in mandatory to display the tax-in price predominantly, once again...)

The economy is very fragile and is limping along as it is. 

Well no, apparently business profits are at record highs, they are making loads of money. Their profits come from consumers buying their stuff. This is what certain people say anyway.

Traditional parties and politicians have failed the public world wide. Hence is the rise of new parties and/or leaders. It's good for politics to keep a check on traditional Politicians. More people embrace the new there will be a change in the old established folks too!

fxgai- hi! nice to chat with you.

Continuing with unsustainable public spending with a shrinking population of income tax payers could be more likely to result in that, I fear. 

Very true. 100% correct.  But I believe  the answer to that is stop wasting money on public spending that is not needed. After all, how often do we all see roads being paved that don't need it. The municipalities get to the end of thte fiscal year and throw the money away on useless projects.

The biggest impact I see from hiking from 8% to 10% is it becomes easier to calculate sales tax in my head.

well, look at what happened when they raised it from 5 to 8%, about what- 3 years ago now?  The country went into a very bad recesssion...

Well no, apparently business profits are at record highs, they are making loads of money.

Good. So lets force them to pay more taxes OR raise the minimum wage. THEN we can talk about raising the consumption tax after we've improved people's lives.

Their profits come from consumers buying their stuff. This is what certain people say anyway

Of course.  But which customers? Usually the ones overseas. That's the Abenomics recipe- devalue the Yen so companies can sell more easily overseas.  That's really where the profits are coming from.

Meanwhile, a weak yen makes everything more expensive here. Can't have ABenomics AND a tax hike. The domestic economy can't take it.

well, look at what happened when they raised it from 5 to 8%, about what- 3 years ago now? The country went into a very bad recesssion...

This is true but it was booming ahead of the sales tax hike, as everyone stocked up before the hike happened. 

And according to the BOJ Tankan this morning, things are great again today. JeffLee will tell you how great things are. GDP growth is even running above trend. This is all despite the consumption tax rate still being at 8%.

So what has changed? Why isn't Japan still in a bad recession (according to the data)?

Or was it just the case that the tax hike had a transitory impact, as economists like to say?

No one likes to pay more tax, but this is money the government is already spending. If people don't want the money spent on them by government cut, then they have to suck it up and pay more tax.

No matter what the government does in terms of reforms, be it spending cuts or tax hikes, there will be short-term repercussions until adjustments are made. I think the politicians are gutless for not just stating as much, if they believe their policies are right in the medium-to-long term. Abe is the most gutless - he doesn't want to take hard decisions at all, preferring to pretend that Japan can grow out of its mess without any significant changes. Leadership like this is what will eventually bring crisis upon Japan.

And according to the BOJ Tankan this morning, things are great again today. JeffLee will tell you how great things are. GDP growth is even running above trend. This is all despite the consumption tax rate still being at 8%.

Thats not it. What’s great is corporate profits. If you’ve been following the news you would know that household spending has not been good since the tax hike.

So what has changed? Why isn't Japan still in a bad recession (according to the data)?

Japan still is in a bad recession. Household spending is not anywhere near what the BOJ wants.

Or was it just the case that the tax hike had a transitory impact, as economists like to say?

I don’t know what economists you have been listening to But I would advise you to go out on YouTube and check out Kyle Bass or Gerald Celente. Don’t be quick to tell you that Japan has not been out of the recession since the tax hike. I for one agree with them.

No one likes to pay more tax, but this is money the government is already spending.

And like I have pointed out in my past post that a lot of that money is being squandered and spent on roads that don’t need to be fixed. Not to mention Overpaid politicians and bureaucrats.

If people don't want the money spent on them by government cut, then they have to suck it up and pay more tax.

Or we could cut wasteful spending, cut the bloated bureaucrats and politicians’ salaries, and raise the minimum-wage before we even start to talk about a tax hike on the people in this country. I think that makes more sense.

No matter what the government does in terms of reforms, be it spending cuts or tax hikes, there will be short-term repercussions until adjustments are made. I think the politicians are gutless for not just stating as much, if they believe their policies are right in the medium-to-long term. Abe is the most gutless - he doesn't want to take hard decisions at all, preferring to pretend that Japan can grow out of its mess without any significant changes. Leadership like this is what will eventually bring crisis upon Japan.

That we can agree on. However, I think we disagree on exactly what adjustments need to be made.

If you want to raise the tax on people that’s fine. Hell you can raise the consumption tax to 15% if you want. Just make sure to raise the minimum wage to 1500 in an hour or more, make sure that everyone gets free health insurance and doesn’t have to pay 30%, raise the retirement age, Lower the politicians current salaries and cut wasteful spending. After that if you want to raise the consumption tax do so to your hearts content. that should be OK.

What is the magic number for household spending that is required before the Government can finally start paying for its out of control spending?

How is it that Abe can promise free education now, when he isn't even paying for all of the governments existing expenditure?

How are households ever supposed to start spending rather than saving for the future when the government keeps making the debt problem even bigger?

I'd be all for cuts to wasteful spending if someone could show me which 30 trillion yen of spending is wasteful. People will come up with a few small examples that don't even add to a single trillion.

What is the magic number for household spending that is required before the Government can finally start paying for its out of control spending?

No magic number. Just raise minimum wages so that people have a liveable income before you raise taxes. simple

How is it that Abe can promise free education now, when he isn't even paying for all of the governments existing expenditure?

Who said Abe can do anything right???

How are households ever supposed to start spending rather than saving for the future when the government keeps making the debt problem even bigger?

That's easy. Raise corporate taxes. Bring foreign reserves HOME. Most importantly raise the minimum wage.

I'd be all for cuts to wasteful spending if someone could show me which 30 trillion yen of spending is wasteful. People will come up with a few small examples that don't even add to a single trillion.

Try cutting the whaling subsidies. The farming subsidies, the roads being fixed that don't need it. politicians' salaries..  need I go on?

What happens when household spending still doesn't go up even though the minimum wages are hiked? Lots of households are on higher than the minimum wage but hold back on spending for other reasons.

That's easy. Raise corporate taxes. Bring foreign reserves HOME. Most importantly raise the minimum wage.

show me the math that says hiking corporate taxes will plug the deficit. What rate?

how are foreign reserves to be forced back the Japan to plug the deficit?

The minimum wage hike isn't go to fix the 30 trillion shortfall for 100 trillion in annual expenditure, if we are realistic.

need I go on?

Yes! That short list wouldn't even account for a single trillion, just as I said.

the shortfall is 30-odd trillion. This is like cutting a third of every single item of expenditure. Actually look at the expenditure pie-chart and pick the full 30 trillion - this is a friendly challenge to you.

Short of major and painful reforms, it isn't possible.

Here's an idea - privatize social welfare spending programs. Boom.

Disagree - 30 trillion worth of Alternatives?

What happens when household spending still doesn't go up even though the minimum wages are hiked?

They will. That's 101 economics.

Lots of households are on higher than the minimum wage but hold back on spending for other reasons.

Those are the full time workers who have money but no time to spend it cause they are pulling 100 hours in overtime. Cut overtime and they will spend.

show me the math that says hiking corporate taxes will plug the deficit. What rate?

reuters did an article on that. Japan's foreign reserves are more than its debt.

how are foreign reserves to be forced back the Japan to plug the deficit?

Liquidate the assets overseas and bring the money back to buy the gov bonds back.

The minimum wage hike isn't go to fix the 30 trillion shortfall for 100 trillion in annual expenditure, if we are realistic.

Like I have said for the upteenthy time, cut wasteful spending.

Yes! That short list wouldn't even account for a single trillion, just as I said.

REally? Where are YOUR numbers to back that?

Short of major and painful reforms, it isn't possible.

Yes. go ahead and screw the little guy.  That your answer?

Here's an idea - privatize social welfare spending programs. Boom.

There we go again. MOre privatization. That's always the answer of the right. Sorry. I disagree.

Disagree - 30 trillion worth of Alternatives?

Yes I do.

By the way, since you wanted numbers here they are.

Japan August foreign reserves rise to $1.268 trln

http://www.nasdaq.com/article/japan-august-foreign-reserves-rise-to-1268-trln-20170906-01544

That money should first be brought back to Japan BEFORE discussing a tax hike. Then raise the minimum wage, undo the Koizumi deregulation that says that companies can hire part time and contract workers permanently without making them full time so people can afford the tax hike, cut the excessive overtime so the full time workers who have money also have time to go out and spend and stimulate the economy, cut wasteful spending, raise the retirement age so that people who are living into their 90's do not collect welfare from the country for 20-30 years, and introduce careful and strict immigration of skilled and unskilled workers to cushion the population fall. 

FINALLY raise taxes.  

See, THAT'S PROPER fiscal reform.  Just only raising the taxes on working people is not going to do it and it shows an abysmal lack of understanding of micro and macro economics, which is why Japan is in the state that it is. I doubt anyone in the LDP or BOJ would pass economics 101  in a real college.

allow me to retract one statement that I made: Japan's foreign reserves are more than its debt.

Sorry that was a mistake I typed before my morning coffee.

Yes 1 trillion dollars of foreign reserves is about 112 trillion yen today - about a tenth of the existing debt pile. The government could bring it all back, and knock the debt down a little, but the yen would strengthen temporarily as a result, hurting exporters.

Here are the actual expenditure numbers:

http://www.mof.go.jp/english/budget/budget/fy2017/01.pdf

See the expenditure numbers in the pie chart on page 6.

30 trillion yen needs to be carved out of that to stop the already humongous debt from growing further, which is actually about half of all spending considering that the debt needs to be serviced, unless the govt is to default.

Whaling subsidies are a drop in the ocean; the entire public works budget including useful as well as useless roads is 6 trillion; parliamentary costs are also not even visible from this birds eye view.

I'll grant you that a fifth of spending on roads might be useless, but even if all 6 trillion were useless, this is well short of the 30 trillion in spending cuts required to balance the annual budget without increasing the debt further still.

Reforms should not hurt the needy - reforms should stop attempting to pamper those such as myself who are able to take care of ourselves.

I agree that wasteful spending should be cut. The way to do that is by privatization. When you spend your money on yourself you spend it more wisely than when some vote buying politician spends it.

Privatizing stuff doesn't mean that the needy get shafted. The government just needs to let the free market provide services, and provide financial support to the needy only, so that they too can choose which services they want to purchase. People like me pay tax to help the needy in this way, but I don't pay tax to pamper my wealthy neighbor. That is inherently wasteful spending because it's not my wealthy neighbor deciding how to spend my tax on them, it is some government bureaucrat who has no clue what my neighbor or myself would actually pay for if we were just left to spend for ourselves.

However, politicians can't buy votes when we voters are the ones spending the money. And many voters are wimps and fear the idea of taking responsible decisions for themselves, even though they are able to decide what food to put in their own body each day.

If we aren't going to see such reforms, then hiking consumption tax is the next best option to plugging the deficit.

Yes 1 trillion dollars of foreign reserves is about 112 trillion yen today - about a tenth of the existing debt pile. The government could bring it all back, and knock the debt down a little, but the yen would strengthen temporarily as a result, hurting exporters.

Not if you raise the minimum wage, which would have the same effect as monetary easing.

30 trillion yen needs to be carved out of that to stop the already humongous debt from growing further,

And you think that raising the consumption tax 2% is going to do that? No, real reform is needed.

which is actually about half of all spending considering that the debt needs to be serviced, unless the govt is to default.

The government is indebted to to the people of Japan who buy the JGBs. So if you further hurt the purchasing power of the consumer, you are literally biting the hand that feeds you and THEN the gov will have no one to buy their bonds which means a default.

Whaling subsidies are a drop in the ocean; the entire public works budget including useful as well as useless roads is 6 trillion; parliamentary costs are also not even visible from this birds eye view.

I'll grant you that a fifth of spending on roads might be useless, but even if all 6 trillion were useless, this is well short of the 30 trillion in spending cuts required to balance the annual budget without increasing the debt further still.

ALL of these wasteful actions are significant. Individually, they are a drop in the ocean. But together, you can start to see a major significant difference.

Reforms should not hurt the needy -

consumption tax hikes will hurt the needy.

reforms should stop attempting to pamper those such as myself who are able to take care of ourselves.

which is why I said raise the corporate tax...

Privatizing stuff doesn't mean that the needy get shafted.

Take a look at health care in the US.

The government just needs to let the free market provide services, and provide financial support to the needy only, so that they too can choose which services they want to purchase.

The free market left to its own devices shafts the consumer. Again, case in point, look at health care.

People like me pay tax to help the needy in this way, but I don't pay tax to pamper my wealthy neighbor. That is inherently wasteful spending because it's not my wealthy neighbor deciding how to spend my tax on them, it is some government bureaucrat who has no clue what my neighbor or myself would actually pay for if we were just left to spend for ourselves.

What does that have to do with raising consumption tax?

If we aren't going to see such reforms, then hiking consumption tax is the next best option to plugging the deficit.

It is the worst option. Because it will accomplish NOTHING without real reforms. And that's what Japan needs. Otherwise you can raise the tax to 20% and nothing will change

Not if you raise the minimum wage, which would have the same effect as monetary easing.

They didn't tell me this one in ECON101. How much money do you imagine a minimum wage hike would add into the economy through extra spending by these low-income earners (many of whom are spouses of higher-income earners)?

And you think that raising the consumption tax 2% is going to do that? 

No, I don't - the consumption tax hike to 10% will produce about 5 trillion yen extra revenues. 

So the bulk of the heavy lifting to balance the budget still has to be done through spending reforms, if people aren't prepared to pay a still-higher European-level of consumption tax to cover what the government is already spending.

The government is indebted to to the people of Japan who buy the JGBs. So if you further hurt the purchasing power of the consumer, you are literally biting the hand that feeds you 

I can't agree with that - what bonds the people of Japan do buy (usually indirectly) is because of their savings in the bank, not because of their consumer purchasing power. The banks where those deposits were made then use the proceeds to buy bonds, because there are no attractive alternative investment opportunities.

And if the consumption tax revenue goes towards plugging the deficit then by definition that is new bonds that do not need to be issued in the first place. (Abe of course wants to spend extra revenues now instead of using it to cover existing unfunded spending, so that's stupid - but it's his plan for the extra revenue, not mine.)

and THEN the gov will have no one to buy their bonds which means a default.

Don't agree with that either. A default is when the government has no money to pay investors the interest on existing debt or redemn the principal. 

What would happen if the buyers of bonds did dry up (currently not an issue, so long as the Bank of Japan continues to bankroll with government Zimbabwe-style policy) is that interest rates would need to increase, in order to attract investors (or speculators). 

But this won't occur if the government were plugging the budget deficit with consumption tax revenue, which results in a reduction in the amount of new bond issuance. Lower bond issuance alleviates upwards pressure on interest rates.

ALL of these wasteful actions are significant.

I do not mean to dismiss any single wasteful spending cut proposal, and I agree that there is much of it, but take the numbers for the whaling one for example. According to an IFAW report I googled, "annual government subsidies for Japanese whaling average around 782 million yen (US $9.78m)". That's 782,000,000 yen, versus the 30,000,000,000,000 yen budget deficit.

So, whaling funding works out to be less than 0.003% of the annual budget deficit. 

0.003%.

If reformers get stuck in the weeds like this, the full 30 trillion yen of spending reforms will never be identified. Rather than search for thousands of miniscule cuts (all which result in uproar from the vested interests), why not just look at the "elephants (or whales) in the room" so to speak. Welfare spending is huge and it's unrealistic to think it is untouchable - the same is true for any of the big picture slices of the budget pie.

consumption tax hikes will hurt the needy.

So adjust the lower income tax bracket a little lower, and boost income support a little, to compensate for that. It's manageable.

The point of the consumption tax is that the vast majority of the populace can afford to bear a portion of the burden that is caused by the money that government is spending on us. This is where the vast bulk of consumption tax revenue comes from, not the poor and needy who have hardly any money to spend anyway. 

The adjustments made to compensate the needy the 2% hike could easily be covered by the extra revenues collected, leaving the rest over to cover part of the deficit.

reforms should stop attempting to pamper those such as myself who are able to take care of ourselves.

which is why I said raise the corporate tax...

I don't pay corporate tax (except to the extent that it is passed on to me through higher prices for products than would otherwise be the case), so that's not going to result in less wasteful pampering on me.

Hiking corporate tax isn't going to fix the budget deficit problem either. For one, because corporate tax revenues go up and down with the economic cycle, and two, because it just isn't enough, even with Japan's rate where it is now - one of the highest in the developed world. 

Even today we are told by JeffLee how corporate profits are at record highs, and yet corporate tax revenue generates only about 12 trillion yen in tax revenues. Say the tax rate were doubled (and assume that this would not result in a reduction of profits), corporate tax would still only amount to 24 trillion (12 trillion extra), and we still have a massive 18 trillion yen budget deficit. Then what? And what when the economy hits a rought spot and revenues dry up? Stop spending temporarily? Never going to happen.

In reality though, doubling the corporate tax rate would certainly send economic activity downwards and probably actually result in lower tax revenues.

Consumption tax revenues are stable, and therefore the best source of tax revenues for steady government spending.

Privatizing stuff doesn't mean that the needy get shafted.

Take a look at health care in the US.

The US may have a messed up health system (I am not familiar with the US), but that doesn't mean that individuals don't make better decisions about how to spent their own money than government bureaucrats do.

Privatization means that free market operators offer services for a price, and the consumers get to decide whether it matches their needs or not. It means that individuals decide how to spend the money, rather than central government.

It does not mean that the government must cease to provide financial support to the needy (as might be the case in the US - if so it just means they have a poor security net). 

Privatization only means that goverment ceases to be the provider of services. Privatization does not mean that government provided safety nets are eliminated.

The free market left to its own devices shafts the consumer. 

Totally wrong. When you buy anything, do you always feel shafted? Nonsense. If you did, you wouldn't spend the money on whatever it is you buy. You'd take your money elsewhere. Right?

What does that have to do with raising consumption tax?

What made you think it had to do with consumption tax? It was related to how to cut wasteful spending.

It is the worst option. Because it will accomplish NOTHING without real reforms.

That's not true. Hiking the tax last time raised trillions of additional revenue as expected - a verifable fact - and extra tax revenues is one side from which to plug the budget deficit.

The worst option is doing nothing about the budget deficit - no expenditure reform, no revenue reform.

How much money do you imagine a minimum wage hike would add into the economy through extra spending by these low-income earners (many of whom are spouses of higher-income earners)?

Where are you getting your facts?? OVER 1/3 of the Japanese population are low-income earners.

And you think that raising the consumption tax 2% is going to do that? 

No, I don't - the consumption tax hike to 10% will produce about 5 trillion yen extra revenues. 

Bring in the foreign reserves, cut unnecessary spending and you will get your 5 trillion plus some.

So the bulk of the heavy lifting to balance the budget still has to be done through spending reforms, if people aren't prepared to pay a still-higher European-level of consumption tax to cover what the government is already spending.

Then cut the spending. Others have already pointed out the same thing. Pork barrel spending. You are not going to fix the debt UNLESS you get rid of Pork barrel spending. Otherwise raising the tax is an exercise in futlility.

The government is indebted to to the people of Japan who buy the JGBs. So if you further hurt the purchasing power of the consumer, you are literally biting the hand that feeds you 

I can't agree with that - what bonds the people of Japan do buy (usually indirectly) is because of their savings in the bank, not because of their consumer purchasing power.

Not true. Case in point- haven't you seen the AKB48 commericials for the JGBs?? They're getting the idols now to beg the salarymen to by the bonds! Sorry mate, you are wrong on this one.

The banks where those deposits were made then use the proceeds to buy bonds, because there are no attractive alternative investment opportunities.

I don't agree at all. There are plenty of alternative investment opportunities both in and out of Japan. People are buying these bonds out of loyalty. They are not expecting returns on their investment. Its like another tax. Check out Kyle Bass on youtube for a more detailed explanation on this very subject.

And if the consumption tax revenue goes towards plugging the deficit then by definition that is new bonds that do not need to be issued in the first place.

That's a VERY BIG if....

(Abe of course wants to spend extra revenues now instead of using it to cover existing unfunded spending, so that's stupid - but it's his plan for the extra revenue, not mine.)

and THEN the gov will have no one to buy their bonds which means a default.

Don't agree with that either. A default is when the government has no money to pay investors the interest on existing debt or redemn the principal. 

Exactly. And how can they pay investors the interest on existing debt or redemn the principal on existing bonds?? Why by issuing NEW bonds!! Same old game. That's how they do it.

What would happen if the buyers of bonds did dry up (currently not an issue, so long as the Bank of Japan continues to bankroll with government Zimbabwe-style policy) is that interest rates would need to increase, in order to attract investors (or speculators). 

But this won't occur if the government were plugging the budget deficit with consumption tax revenue,

which results in a reduction in the amount of new bond issuance. Lower bond issuance alleviates upwards pressure on interest rates.

You are assuming that raising the consumption tax will be sufficient to do that. You are also assuming that there will be no depression if that happens, which as I can tell you, everyone from Kyle Bass to Gerald Celente to Edward Harris, to Peter Schiff have all warned WOULD happen. I mean absolutely no disrespect, but these people are the heavyweights of the finance and econ world and I have to believe them before you- again with all due respect.

ALL of these wasteful actions are significant.

I do not mean to dismiss any single wasteful spending cut proposal, and I agree that there is much of it, but take the numbers for the whaling one for example. According to an IFAW report I googled, "annual government subsidies for Japanese whaling average around 782 million yen (US $9.78m)". That's 782,000,000 yen, versus the 30,000,000,000,000 yen budget deficit.

So, whaling funding works out to be less than 0.003% of the annual budget deficit. 

0.003%.

I'll take your word on that. You've done the research on this. I haven't. Hat off to you.

If reformers get stuck in the weeds like this, the full 30 trillion yen of spending reforms will never be identified. Rather than search for thousands of miniscule cuts (all which result in uproar from the vested interests), why not just look at the "elephants (or whales) in the room" so to speak.

Why have one or the other? Lets just cut through all the wasteful spending. Even the little fish. And to hell with the vested interests. But you make a very good point.

Welfare spending is huge and it's unrealistic to think it is untouchable - the same is true for any of the big picture slices of the budget pie.

We can and should cut the welfare spending. How to do that? well, look, we have over 27% of the population over the retirement age. AND they are living well into their 90s. So lets raise the retirement age to about 75. That alone would cut a HUGE portion of welfare spending. Retiring at 65 was great when people lived to 70-75. But now people are living to past 90. Can't have them living off the state for over a quarter of a century. Raise the retirment age.

consumption tax hikes will hurt the needy.

So adjust the lower income tax bracket a little lower, and boost income support a little, to compensate for that. It's manageable.

No argument there whatsoever.

The point of the consumption tax is that the vast majority of the populace can afford to bear a portion of the burden that is caused by the money that government is spending on us.

Here is where I think we have fundamentally disagreed and why we have been going back and forth. I do not believe that above statement at all as we are fast approaching an economy where soon half of the people will not be working full time. The number is already over a third. In fact, poverty is cited quite often as a main reason of population decline as young people today feel they can't afford children.

This is where the vast bulk of consumption tax revenue comes from, not the poor and needy who have hardly any money to spend anyway. 

The adjustments made to compensate the needy the 2% hike could easily be covered by the extra revenues collected, leaving the rest over to cover part of the deficit.

Then what you should be advocating is an income tax increase on the higher wage earners. Consumption tax is a tax on EVERYONE including the poor.

reforms should stop attempting to pamper those such as myself who are able to take care of ourselves.

Agree. But a consumption tax does not target people in your wage bracket. It targets EVERYONE. Everyone has to pay the same consumption tax regardless of their income bracket.

I don't pay corporate tax (except to the extent that it is passed on to me through higher prices for products than would otherwise be the case), so that's not going to result in less wasteful pampering on me.

Hiking corporate tax isn't going to fix the budget deficit problem either. For one, because corporate tax revenues go up and down with the economic cycle, and two, because it just isn't enough, even with Japan's rate where it is now - one of the highest in the developed world. 

Then lets talk about hiking the income tax on the higher wage earners. And like you said above, cut income taxes on lower wage earners. Then a consumption tax hike might be doable.

In reality though, doubling the corporate tax rate would certainly send economic activity downwards and probably actually result in lower tax revenues.

People are saying the same thing about raising consumption tax on a populace too poor to consume.

Consumption tax revenues are stable, and therefore the best source of tax revenues for steady government spending.

Assuming you have a robust economy where people are consuming. This is not the case in Japan. Raising the consumption tax where the GOV and BOJ is complaining that people are not spending enough is economic suicide.

Privatizing stuff doesn't mean that the needy get shafted.

We are definitely going to disagree here.

The US may have a messed up health system (I am not familiar with the US), but that doesn't mean that individuals don't make better decisions about how to spent their own money than government bureaucrats do.

Privatization means that free market operators offer services for a price, and the consumers get to decide whether it matches their needs or not. It means that individuals decide how to spend the money, rather than central government.

You are right to say you are unfamiliar with the US health system, but if you studied it you would understand just how wrong your statement is. Individuals are not always free to decide because when privatization takes over the private sector can then cut corners and provide mediocre services for higher prices due to the bottom line. It is not a good deal for the consumer. Again, please go and reseach the US healthcare system. You will see that your comment is completely inaccurate.

It does not mean that the government must cease to provide financial support to the needy (as might be the case in the US - if so it just means they have a poor security net). 

No but it means that the safety net gets thinner and thinner as you privatize more and more. 

Privatization only means that goverment ceases to be the provider of services. Privatization does not mean that government provided safety nets are eliminated.

It means that is way the economy is headed- to less and less saftey nets. Study the US under Reagan. They said the same thing and now look at them.

The free market left to its own devices shafts the consumer. 

Totally wrong. When you buy anything, do you always feel shafted? Nonsense. If you did, you wouldn't spend the money on whatever it is you buy. You'd take your money elsewhere. Right?

We're not talking about products. You've changed your tune completely. We are talking about public services as you stated above. Products and services are completely different.

It is the worst option. Because it will accomplish NOTHING without real reforms.

That's not true. Hiking the tax last time raised trillions of additional revenue as expected - a verifable fact - and extra tax revenues is one side from which to plug the budget deficit.

AND landed us in a spending recession we have STILL not been able to come out of. Raise the minimum wage, cut income tax for the poor and then raise the consumption tax. There are alot of poor people that are going to be hurt if you just raise the consumption tax.

The worst option is doing nothing about the budget deficit - no expenditure reform, no revenue reform.

Then lets reform the economy. That may include a tax hike in the future, but NOT until all other reforms are done first.

Bring in the foreign reserves, cut unnecessary spending and you will get your 5 trillion plus some.

Yeah but people never say which 30 trillion is the unnecessary spending. 

I suggest the welfare spending could be looked at (more than 30 trillion yen there) and people shoot me down! 

There is no easy decision because all spending is going to someone currently and those recipients are vested interests. Even though the country overall and the vested interests themselves would be better off if spending were reformed, people are afraid of change and demand the status quo.

Look at North Korea. The miltary is the ultimate example of this. But they are scared to change and follow a peaceful path because as they are now, they as a miltary are the "winners" in North Korea. But if North Korea reformed and followed peaceful economic development then all North Koreans, and the miltary members too would be better off. It's easy for us to see this looking at them from the outside, but the same is true for we suffering under poor government here in Japan too.

I can't agree with that - what bonds the people of Japan do buy (usually indirectly) is because of their savings in the bank, not because of their consumer purchasing power.

Not true. Case in point- haven't you seen the AKB48 commericials for the JGBs?? 

I haven't seen those commercials, but I realise that consumers can directly but JGBs too. That is why I said "(usually indirectly)" :) 

There are plenty of alternative investment opportunities both in and out of Japan.

Certianly outside, but Japanese banks don't like to take foreign currency risk since their deposits are in yen.

You are assuming that raising the consumption tax will be sufficient to do that

Well it's a step towards plugging the deficit - it would not make the deficit worse.

I disagree that the 2% consumption hike tax is going to bring a depression on Japan (it didn't happen last time - just a boom/bust before and after the hike). We'll know the true answer to this question about a year after the hike goes into effect.

Why have one or the other? Lets just cut through all the wasteful spending. Even the little fish. 

Yep, but it takes time. DPJ tried to do this when they were in power, but they got bogged down in the weeds and all the vested interests opposed them and ultimately no drastic spending cuts resulted. Just a few episodes like Renho asking "do you have to have the fastest supercomputer in the world? Isn't second best enough?" now remain.

This is why I want to focus on the big ticket spends first.

We can and should cut the welfare spending. How to do that? 

Privatize :) If service provision can be privatized, then it should be. Delegate service provision to the free market, and retain the function of providing financial assistance within the government based on tax collection. Heck if Japan did this it could cut taxes even, not hike them further.

So lets raise the retirement age to about 75. 

Yeah but not everyone under 75 has the means to provide for themselves. We should just change the system so that people save directly for themselves during their working lifes. Then government would only need to pay for the needy and the really long-lived folks who ran out of retirement savings.

I do not believe that above statement at all as we are fast approaching an economy where soon half of the people will not be working full time. 

Yep, but I think we need to look at people on a household basis, rather than individual income basis. We have My Number now so government can use that info to figure out who is dependant on who.

Then what you should be advocating is an income tax increase on the higher wage earners. 

No! I hate progressive tax systems, I think they are unfair and distort economic behaviour, and they don't provide revenue in a stable manner. It goes up and down with the economic cycle. It's a problem when you have a recession and suddenly you need to spend more money helping the needy but your tax revenue has just gone down at the same time.

Consumption tax is a tax on EVERYONE including the poor.

Yep, but financially supporting the poor is a function that government is to fulfil. 

The consumption tax is good because it provides a stable source of revenue. The consumption tax is to efficiently collect tax revenue.

The expenditure side of hte budget is where it is decided who to spend money on. So focus the spending on the needy.

It targets EVERYONE. Everyone has to pay the same consumption tax regardless of their income bracket.

Same rate, but the rich pay loads in consumption tax because they consume more. New houses, new Mercedes, fine wine, overseas trips, etc etc. That's a lot of consumption tax.

Poor people don't pay consumption tax for fine wine, unless they decide to buy fine wine. It's an avoidable tax. Rich people can evade income taxes, but they can't evade consumption tax.

People are saying the same thing about raising consumption tax on a populace too poor to consume.

They did say that, but Japan is not in a depression... it is only in stagnation, and I don't think that consumption tax is the cause of it.

Assuming you have a robust economy where people are consuming. This is not the case in Japan.

YOu can find charts of consumption tax revenue since it's inception, and you'll find that the numbers are very steady - the revenues increased in step fashion when the rate was hiked.

Raising the consumption tax where the GOV and BOJ is complaining that people are not spending enough is economic suicide.

I think the GOV and BOJ are wrong about economic management.

Individuals are not always free to decide because when privatization takes over the private sector can then cut corners and provide mediocre services for higher prices due to the bottom line. 

So maybe I should add that my assumption of privatization is that suppliers/providers are subject to free market competition. If a privatized supplier is a monopoly (simmilar to certain cases in Japan) then yes it typically fails to provide good service. 

My idea of privatization is that you have a free market - new competitors can enter and steal away disatisfied customers from failures.

No but it means that the safety net gets thinner and thinner as you privatize more and more. 

My idea of the safety net is that it is "money from the government to the needy" so that they can purchase services from free market competitors - just like people who have their own money.

We're not talking about products. You've changed your tune completely. We are talking about public services as you stated above. Products and services are completely different.

I don't see that at all. Lots of services are provided by free market operators, not government.

AND landed us in a spending recession we have STILL not been able to come out of. 

I don't know what the actual numbers are, but the Japanese population is shrinking so even without a consumption tax hike I'd expect spending to decline, unless there is fast enough economic growth.

Anyway let's call it a day on this story :) These comments are too long :)

Yeah but people never say which 30 trillion is the unnecessary spending. 

Very true. But that's another discussion.

I suggest the welfare spending could be looked at (more than 30 trillion yen there) and people shoot me down! 

I don't mate.

Well it's a step towards plugging the deficit - it would not make the deficit worse.

Unless spending goes down as a result.

I disagree that the 2% consumption hike tax is going to bring a depression on Japan (it didn't happen last time - just a boom/bust before and after the hike).

According to many economists it brought back a recession we still haven't gotten out of yet..

They did say that, but Japan is not in a depression... it is only in stagnation, and I don't think that consumption tax is the cause of it.

WELL, that's debatable. I personally think it contributed to it among other factors of course..

The consumption tax is good because it provides a stable source of revenue. The consumption tax is to efficiently collect tax revenue.

Not if the gov mishandles the money. That's why you have to cut wasteful spending first. Otherwise you just raise the tax and nothing changes.

I think the GOV and BOJ are wrong about economic management.

Hoho!! NO argument THERE!! LOL

Same rate, but the rich pay loads in consumption tax because they consume more. New houses, new Mercedes, fine wine, overseas trips, etc etc. That's a lot of consumption tax.

Then how about raising the consumption tax on luxury items to say 15% and lowering the tax on neccessary items? Buying a bottle of water shouldn't have the same consumption tax as a can of beer, for example. What determines which class the items fall in is another discussion for a different time.

My idea of privatization is that you have a free market - new competitors can enter and steal away disatisfied customers from failures.

You and I both know that's not always how the free market always works.

don't see that at all. Lots of services are provided by free market operators, not government.

Some services yes. Other services no.

don't know what the actual numbers are, but the Japanese population is shrinking so even without a consumption tax hike I'd expect spending to decline, unless there is fast enough economic growth.

I think we've lost about a million people the last 4 years. Its really abysmal.

Anyway let's call it a day on this story :) These comments are too long :)

LOL. Fair enough! I'd love to meet up with you some day and have a beer with you while discussing this a bit more. Its been really great discussing this with you and very stimulating. I agree it is hard to have a proper discussion through posting so let me know if you're interested and we'll find a way to hook up and chat over a few drinks. Take care brother!