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Noda says Japan must tackle debt to avoid credit rating cut

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Noda says Japan must tackle debt to avoid credit rating cut

that is impossible because increase in consumption tax alone is not the answer. btw, who cares for credit ratings?

1 ( +2 / -1 )

some14someJan. 15, 2012 - 07:18AM JST

who cares for credit ratings?

Very critical. I have posted a brief on this issue listed below; It would cost more money to borrow for keeping Japan above water. Money supply is a blood supply to your heart (economy).

Euro crisis deepens as France, Spain, Italy, 6 other nations downgraded

0 ( +1 / -1 )

It's not difficult.

Governments simply should not spend more money than they have. Much like a family or business. If it is necessary to do so, there needs to be a payment/payback plan along with the debt. The situation now is akin to a person runnnig up a credit card that has their grandchildren's name on it. The current generation is enjoying benefits that their children will have to pay for. It simply isn't fair.

The US is doing the same thing. Obama's government is borrowing $4 BILLION every day to finance itself. That level of spending is not sustainable.

4 ( +5 / -1 )

@DS, there is an automatic debt reduction plan already in system in the US if the moron congress cannot agree on this issue. Obama has already stated his WILL strongly if any congress tries to abolish the plan, he is ready to fight against it. We will see. US credit rating is the same as well as France doing and they are better than Japan. Germany is doing great, I am glad for that.

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There is no "debt reduction plan" in the US. The plan merely slows down the RATE of debt increase. Even if the entire plan is implemented, there will be yearly budget deficits for the next 10 years. WHich means the national debt will still increase every year for the nexr decade. There is NO plan to actually balance the budget, or to 'gasp' repay the money that has been borrowed and spent.

I haven't seen any hard numbers on Japan's fiscal situation yet, but one difference is that the vast majority of Japanese national debt is held within Japan, whereas the US for example is getting money from overseas to finance its overspending.

Canada will have a balanced budget by 2014, and start repayment at that time. Also the lowest debt to GDP ratio in the G7 nations. Good job Steve!

-1 ( +1 / -2 )

The plan merely slows down the RATE of debt increase

Yep, you are right. I did not explain it properly. You and I are on the same page.

0 ( +1 / -1 )

stop spending so much money on useless construction. You don't need to change the traffic lights every three years. You don't need to repave the roads every two years. You don't need to build roads that go nowhere. Japan has spent a huge amount on so called "public works" programs, thinking it would stimulate the economy over the last fifteen years. It hasn't. All it's done is channel taxpayers' money into yakuza controlled construction firms.

I can't believe Japan, who spends only about 1% of their budget on the military, has a debt twice as bit as their GDP. This is absolutely ridiculous.

Japan should get the award for "most debtist".

3 ( +4 / -1 )

Governments simply should not spend more money than they have.

DS -- what a foolish comment in the context of Japan's current situation. Or did you not read that Japan's debt is already at over 200% of GDP? The horse has left the Japanese barn on your simplistic economic theory. Japan's debt service costs are so high that if it did not issue additional debt each year, the country would collapse. And with a shrinking population and economy, the fact that Japan's debt is mainly held domestically will inevitably change. And then credit ratings and the country's willingness to sacrifice to raise the needed taxes will be critically important to raising funds.

-1 ( +2 / -3 )

"Noda said it could be further harmed if the country is seen as dragging its feet on reforms."

Mwooaaaa Haaaaaaa Haaaa

3 ( +3 / -0 )

And then credit ratings and the country's willingness to sacrifice to raise the needed taxes will be critically important to raising funds

herefornow-yapee. Critical and needs to be done.

0 ( +1 / -1 )

Herefornow;

Hardly simplistic, simply good economic principle. Japan should actually be spending LESS than is taken in. Money the government spends is taken out of the economy, so it is going to be used anyway. The difference is that it would be spent by the private sector and not the government.

I find YOUR idea simplistic that additional debt is needed to pay the interest on the current debt. That is a vicious circle that has no exit.

1 ( +1 / -0 )

"Noda says Japan must tackle debt to avoid credit rating cut"

I agree...but most of us completely disagree with his 'how' to address this....before increasing anything, first he must cut all the unnecessary spending including reducing housing and other subsidies for govt workers, reducing the number of govt workers, reducing the number of politicians, making the psuedo-private (dokuritsu gyosei houjins) entities to be P/L centers, eradicating the amakudari system, etc...Until he or the next PM does this, the citizens and residents will not accept these hikes.

2 ( +2 / -0 )

Wow I hope Japan will not join the European list... But hey - we can all join the ship...

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The difference is that it would be spent by the private sector and not the government.

DS, I believe you are encouraging Domestic Consumer Spending if I understand your post correctly. Agreed totally!!

That's exactly what the US has been saying in the past 20 years to Japan.

Wasteful Government Spending

While the rest of world has been spending earned surplus to improve their quality of life, Japanese givt has been spending it on wrong places such as earmarks, airports to no where, and built Hokomono with no visitors

Consumer Spending

Many Japanese salarymen have nothing to show today except a shoe box house.. Many are still working under a sweat hop condition.since the business in private sector is not willing to spend on the capital investment for productivity and efficiency at work place. Who are filling the gap? The workers. They are working more than 60 hrs, and still they cannot catch up with a speed of global changes.

I had a chance to tour some Japanese hospitals, and my discovery was beyond my comprehension. Everyone was over worked and tired with outdated medical equipments and tons of paper work that needed to be done to satisfy govt regulations. The old Japanese economic model has to go out the window and start spending on the consumer. and business in private sector. That's the key.

5 ( +5 / -0 )

Japan should just default it is going to happen

1 ( +1 / -0 )

Yes, start with spending money only in Japan to rebuild. Then, decrease the costs for tourists to come to Japan. Finally, make a list of areas and percentages for cuts, and put it on a referendum If the people vote 20% cut in education costs and 30% on welfare costs, so be it. If elected officials cannot make a decision, the people will make it for them. It will also help to not vote for any incumbent. Give the other men and women a chance, at least for one year.

-2 ( +0 / -2 )

Cut the wasteful spending.

0 ( +0 / -0 )

Powerbroker Ichiro Ozawa and his supporters arguing that raising taxes would hurt the already weak economy.

I am hoping the rating agencies do not read his comment. If he is still considered as a powerbroker in Japan politics, he is sending a strong message to the world Japan is not ready to fix the debt crisis. Please tell him to shut up. Or he needs to show a solid plan to the world how he can fix it.

3 ( +3 / -0 )

It lowered Italy's and Spain's by two notches and did the same for Portugal and Cyprus.

Portugal and Cyprus were downgraded to junk-bond status and Cyprus risks another downgrade in the short-term future. Although Cyprus was doing good in managing its deficit levels, their exposure to Greek debt seems to be crucial in this downgrade.

If Greece goes through a disorderly default on its debt in 10 weeks from now, the consequences will be huge not only for Cyprus but for the entire eurozone.

0 ( +0 / -0 )

Although Cyprus was doing good in managing its deficit levels, their exposure to Greek debt seems to be crucial in this downgrade

LHommeQuiMentJan. 15, 2012 - 12:24PM JST

US has a 2 trillion dollar Euro exposure as of today. I do not know about Japan. A very serious concern. If Euro goes down, we are going down together with them, I am afraid of that.

0 ( +1 / -1 )

Lower taxes, reduce gov't, encourage solidarity within communities and demand employment in the private sector.

0 ( +0 / -0 )

Well said gaijininfo!

Cut the construction, cut the housewife 1.3 million safety net, cut all the hand in pocket cash we know is going on, cut the salaries of government workers. Heck, cut the child bonuses - I would rather the money go to day cares and education fees so mom and dad can't use the money on pachinko and the like.

RAISE the taxes of tobacco and alcohol, brand name goods and other luxury items. Charge ossans and babas for using clinics and the like for social places, charge more people for traffic violations... While I'm at it, how about cutting aid to countries that don't really do much for us and focus on the people of Japan who need help? Millions in aid to North Korea? Cut it!!

Don't spend what you don't have - rule number on on budgeting. Shame that countries don't seem to understand that!

0 ( +2 / -2 )

To the above list I would add raising the retirement age to 70, and means testing those who get old age pension. These are ideas that any industrialized country needs to consider.

2 ( +2 / -0 )

means testing those who get old age pension

So you'd have two people in similar jobs, earning the same amount, paying the same premiums - one person saves for a rainy day, the other spends all his surplus on foreign holidays and fast cars. When they hit 70, the one with no savings but lots of good memories gets a full pension, while the one with money in the bank is told to fend for himself?

That can't be right. The pension received should reflect the premiums paid in. What a person does with the rest of his money is his own business.

4 ( +5 / -1 )

The problems are so deeply embedded that it will take a massive crash for anything much to be resolved. There is enormous wastage in the public sector. Deep cuts in staff numbers needed.

Tax evasion is huge in Japan. Tax laws and enforcement to be changed to increase tax take.

Ask the elderly to pay more for things like health insurance and so on.

1 ( +1 / -0 )

what a lousy article! Nowhere does it state Japan's sovereign debt rating (which is S&P / Fitch AA- & Moodys Aa3) already below that if the US & France) to give readers a way to compare where Japan sits relative to the EU economies Noda is referring to. Half-arsed journalism to match the arsed-govt bureaucracy we residents have to deal with. What gets me is that Noda puts the repayment burden on all taxpayer's - including low income earners - and has absolutely no plan to cut the massive spending currently used for the huge govt bureaucracy & continued pork-barrel construction projects.

0 ( +0 / -0 )

cut the child bonuses

Stunning idea for a country with a low birthrate problem already in effect. I am glad you are not running the country!

1 ( +1 / -0 )

Nowhere does it state Japan's sovereign debt rating (which is S&P / Fitch AA- & Moodys Aa3) already below that if the US & France) to give readers a way to compare where Japan sits relative to the EU economies Noda is referring to

Agreed, Japan was downgraded last summer so I have no idea why that has not been reported on.

0 ( +0 / -0 )

Cleo, in that case, why bother with a national pension system at all? If people can only receive what they contribute, then it is far more efficient to eliminate the natoinal pension entirely. Let people save on their own and choose how to invest those savings. It would allow an entire govt department to be eliminated! Great idea, eh?

As others have said, the biggest problem is in spending on "public" works, roads to nowhere, etc. The construction industry in Japan is far too huge a part of the economy. Plus, at each layer of buraucracy, some of the money sticks to the fingers of those doling it out.

Bottom line is, we can't keep running up biills that our children and grandchildren (if we have any) have to pay. It's irresponsible.

-1 ( +0 / -1 )

Stunning idea for a country with a low birthrate problem already in effect. I am glad you are not running the country!

Not in the least - using that money towards opening more daycares and offering support for working women who might want kids is better - plenty of people out there are NOT having kids because there is not enough daycare. Me being one of them. I don't care about getting a baby bonus - I want to know if I have a kid I won't have to quit my job because I can't find the support I need. Thank god YOU aren't running the country.

DS, indeed the age needs to be raised.

0 ( +0 / -0 )

why bother with a national pension system at all? If people can only receive what they contribute, then it is far more efficient to eliminate the natoinal pension entirely. Let people save on their own and choose how to invest those savings

At one level, that would be fine. Those with the wherewithall can invest in private schemes if they want. In addition those who for whatever reason were not able to do that need a basic safety net. if the basic safety net is removed from pensions, then those at the bottom simply move onto welfare, which is ultimately more expensive for the nation. The basic pension is a kind of insurance policy; everybody pays in, those who get ill/injured and are unable to work get a payout, and those who stay fit get a payment when the policy matures. Or would you rather see folk dependent on charity?

Bottom line is, we can't keep running up biills that our children and grandchildren (if we have any) have to pay. It's irresponsible.

On that, I agree.

0 ( +0 / -0 )

Sadly Cleo, not everyone pays in. Heck, a former PM wasn't paying in!! I personally would love to stop paying pension and invest my money the way I want because the way it is going, I certainly won't be getting anywhere near the money I have paid into this country via taxes when it comes my turn to claim pension. This is a nanny nation when it comes to this. As adults, we shouldn't have to support those that don't pay in - and we do. The idea that we would have to support people via welfare is exactly why some people don't bother to pay into it - they know we'll look after them. A little self responsibility would be nice as this is one issue that is bringing the nation to its knees!

1 ( +1 / -0 )

tmarie - I'm all for stiffer penalties (heck, for penalties of any kind - at the moment, there's nothing) for those who don't pull their weight - including those stay-at-home housewives whose husbands earn enough to keep them yet get a free pension. The thing is, in a civilised, affluent society we don't expect anyone to starve as a result of poverty, illness, disability or even fecklessness. So if at the very base we expect to have some kind of safety net, everyone needs to pay into the system.

Your taxes, by the way, aren't just to pay your pension - the roads, refuse collection services, schools etc etc wouldn't happen without taxes. I just wish they didn't waste so much of it on stuff that isn't needed, like amakudari, superfluous royal family members and coast guard ships in the Antarctic.

-1 ( +0 / -1 )

Too bad "popularity" doesn't pay debts because it seems that it's all they are looking for like it would matter... they Prime Minister may resign in less than a year anyhow. If all we have to do is to pay more taxes with a very "very" specific note to reduce back the tax back once the debt is paid (notice I said "very"), then it should be fine. Unfortunately I have never seen any government doing this...

0 ( +0 / -0 )

The alerts from the PM Noda did make sense & definitely, but how to tackle it ? Oh wait, n..no..No...NO taxes again, better off for you to spend less on F-35s ! ( by cutting by half the budgets on 142 pieces of new toys, quite a few pennies can be saved to mend the black hole ) ?

0 ( +0 / -0 )

Cleo, well aware of where my taxes money goes - thanks though for thinking I'm an idiot.

There is no reason why people can't pay - unless they don't have a job and I am all for supporting them. Thing is, many, many people with jobs here don't pay. Why? because they know the government will look after them. Thing is, I have a feeling those people will get looked after before I do when it comes time for me to get what I paid. The system is clearly broken and yet, nothing being done to fix it. No surprises there.

0 ( +0 / -0 )

thanks though for thinking I'm an idiot.

No need to be stroppy. I wasn't calling you an idiot, just pointing out that our taxes are used in ways that aren't always to our benefit.

no reason why people can't pay - unless they don't have a job and I am all for supporting them.

Including the sararimen's housewives? People with no job who can afford not to work. I'm pretty sure you don't want to support them. Under the present system they are entitled to the same pension as a person who has paid the kokumin nenkin faithfully all their working life. Now the country is even paying out pensions to women who 'forgot' to pay when they stopped being full-time housewives of sararimen. This glitch in the system needs fixing, as well as going after the others who are supposed to pay and don't.

0 ( +0 / -0 )

Not stroppy at all. I just find that sometimes your comments are rather patronising - this being one of those times.

I think I have made myself pretty clear on the issue of housewives with no jobs Cleo. Those able to work and aren't shouldn't get anything - I feel that way about welfare as well. If people want a handout, they can give back to the community by cleaning roads, parks, acting as crosswalk guards. Thing is, left wing folks scream about such suggestions. As far as I'm concerned, haven't paid a dime in, haven't work a day in your life, nothing for you. If that leads to a life of poverty in the later years, can't say I feel for them. Is that harsh? Perhaps but reality is harsh and why should my money be used for them?

Indeed, the system needs to be fixed. Thing is, those SAHM who are in for the free ride will scream murder if the government tries to change things. It is pathetic. Pathetic, lazy and selfish.

0 ( +0 / -0 )

Woo! Austerity! Because that's working out so damn well for Europe.

-3 ( +0 / -3 )

Some 95% of Japan's government bonds are held by locals,at the current pace of accumulation, within a few years government debt will absorb all the savings in the Japanese private sector, hence requiring financing from abroad. This almost seems an inevitability. What seems also inevitable is that foreigners will demand higher interest yields. It is hardly unrealistic to expect that yields could increase from 1 percent to 2 percent, or double across the yield curve from the current extremely low base. What happens in this scenario? A simple answer is: disaster.

The only reason it has come this far is that Japanese savers have no idea of what is going on. They've been saving for their retirements. And now, they are retiring in record numbers. these retirees don't realize that the government has taken their retirement savings and spent the money. They think it is waiting for them, ready to finance their golden years.

They're in for a shock. And so are investors, when they finally realize that those JGBs are worthless.

From. http://www.forbes.com/sites/stephenharner/2011/11/18/coming-to-grips-with-japans-government-debt/

http://business.time.com/2011/04/06/a-hard-look-at-japans-debt-problem/

http://www.csmonitor.com/Business/The-Daily-Reckoning/2011/0110/On-the-worthlessness-of-Japanese-government-debt

0 ( +1 / -1 )

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