The country eventually has to boost taxes to cover rising costs for health and elder care as the average age in the nation rises.
No country has to "boost" taxes to deal with rising debt. That argument assumes that Japanese people don't pay enough tax when, in fact, people do pay a lot of taxes.
Income is taxed by the government at both the national and municipal level. Effective meaning a person's income is taxed twice. There are taxes on property, capital gains, exit taxes, tariffs, fees, etc.
The Japanese government is very much like those in the rest of the developed world: it imposes onerous tax burdens on its citizens, collecting gargantuan revenues.
Japan's debt woes are the result of DEFICIT SPENDING. Corruption, waste, and inefficiency are real, and significant factors in rising costs.
European states have high value added taxes (VATs), income tax rates above 40% in some cases, yet, many are being crushed by huge debts.
Tax increases hurt the economy, and last year's consumption tax proved that. An anemic, sluggish, economy isn't going to lead to balanced budgets, and reduce overall debt. Higher VATs, or income taxes discourage robust, discretionary consumer spending.
What's more, higher VATs hurt working families, especially those with low or median incomes. Essentials like food, energy, and healthcare become more costly. Higher taxes limit disposable income, and thereby, reduce discretionary purchase. This has a knock on effect on the bottom line of businesses, particularly small and medium sized ones.
On the subject of elder care, tax hikes work against families and individuals caring for their aged and/or ill relatives. Healthcare isn't cheap, and taking away much needed income from working people won't help Japan's elderly population.
Thorough audits, corruption inquiries, cuts in red tape, and restraint with public finances are what's needed to rein in the debt, and control rising costs. This notion that taxes increases are essential is misguided, and fallacious.
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. The souls of the dead are supposedly at rest there. According to Shinto tradition, they're all bound together eternally. You can't separate any one particular soul from the rest.
Fair point, lucabraci about no one being buried there, but, there is surely a way to do a spiritual disinterment. After all, the thirteen criminals weren't originally enshrined in Yasukuni. They've only been there since the 70s after one of their relatives, a monk, decided they should be there, over the objections of the Showa emperor no less.
The point is that there is a way to repudiate the actions and mindset of the war criminals enshrined there, and strip them of an honour they do not deserve posthumously. There's nothing that's "eternal" about this injustice, There's always a way to make amends.
1 ( +1 / -0 )
Japan can put this one issue to bed by simply following Germany's example. Remove the 13 war criminals from Yasukuni shrine, and move them to private burial grounds.
If one looks at Germany, the Nazis, and Adolph Hitler have no place of honour in modern German. Nazi symbols are banned, and neo-Nazis are regarded as threats, and criminals. The thirteen criminals in Yasukuni shouldn't be honoured by anyone. Their actions set Japan on a course that led to the deaths of millions of innocents, including Japanese citizens.
President Xi, however, is a hypocrite. He condemns Japan's wartime actions, and the politicians who white-wash them, yet heads a party responsible for 70 million Chinese deaths. There has been no apology or contrition about the young people massacred at Tiannamen Square. Invasions of Tibet, waters of neighbours, illegitimate claims to Taiwan, China has not been an angel in world affairs.
Xi should take a close look at the communist party's history of repression, corruption, and murder before he lambasts Japan. Japan has been a far more positive, and civil country than China has been since the war.
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Rising wages are essential for Prime Minister Shinzo Abe’s campaign to shift growth into a higher gear and distance the economy further from 15 years of deflation.
For "rising wages" (2.6% is meager) to have an impact, the rate of taxation on those wages must stay the same, or go down. If the local, and national governments levy higher tax rates, then the net benefit of those salary hikes will be severely limited, if not negated all together.
PM Abe's approach of strong-arming privately held business to do what he wants is rather thuggish, and runs contrary to democratic, free market principles. A better, more fair way, would be to reduce businesses tax burden in exchange for higher salaries.
As stated in the article, not every company can afford to dole out more pay. Small businesses and start-ups are even less able to do pay their people more than they do.
PM Abe is so focused on making Abenomics work, he has not tried to get the economy growing again.
0 ( +0 / -0 )
The central bank stayed pat on its record easy money program, which is adding about 80 trillion yen ($663 billion) to the money supply every year.
Assuming that's true, very little, if any, of that money resulted in higher wages, or investment by businesses, or added jobs. QE can't create inflation, better wages, or improved sales.
Demand has to go up for goods and services. That means people need more discretionary income. Abenomics and QE haven't led to higher take-home pay, and never will.
Cutting taxes on income, and business would much better serve the government's goal of boosting inflation. Working people would have more disposable income, businesses more leeway to increase salaries and/or re-invest. PM Abe, and BOJ governor Kuroda are not focused on actually fixing the economy in anyway meaningful to the average consumer. Their policies do nothing to encourage consumer spending, or more robust investment.
-1 ( +0 / -1 )
So many long drawn out verbose opinions about the economy. I love economics because its such a subjective BS topic where even air heads can look intelligent. A couple of personal experiences; My Uni graduate son has multiple job offers; my friend had an organ transplant at no charge provided compliments of J health insurance; I just completed an M&A worth USD430; my stock portfolio is up 120 percent and my Mercedez sales chick is gonna get a hefty bonus. Oh the dieing J economy.......
"A couple of personal experiences" aren't "subjective BS"?
You had something of a good point till you contradicted yourself.
That you're doing well doesn't mean the economy isn't "dieing". Your Mercedes chick may be enjoying some good sales now, but, down the road, it she may well get a smaller bonus as taxes go up, cost rise, and demand dwindles.
0 ( +0 / -0 )
The free market approach is by no means perfect, but it's better than the alternatives, and Japan's economy is proof of it. But Japan isn't doing it right. And we now have the ridiculous situation of Abe trying to command companies to raise wages, when it is not a centrally planned economy.
Wise words fxgai.
PM Abe's approach is all wrong. The government can't be the driver of the economy if growth is going to improve. The government can be a facilitator (reasonable tax regime, sensible regulation, free trade, etc) certainly. However, Abe seems to have the attitude that businesses have an obligation to make his policies work. That's just not the case.
This is the gospel according to Henry Ford, and used to be common sense until "free market" ideas - which stress short term greed and nothing else -- came into vogue from the 80s.
Free market ideas have a long, long history, JeffLee, and they're long been "in vogue". Yes, there are those who act out of "short term" greed, but, that's not the case with ALL business people.
If you're using an iPhone, that's the product of business that employs thousands of people, and which has long term goals. Henry Ford's company continues today, albeit in a weakened state.
With more and more people in the developed world turning to self-employment, or freelancing, free market approaches are sorely needed. Deficit spending, and taxation have yet to achieve robust growth, and certainly government strong-arming isn't the answer.
If the government wants manufacturers to start investing more in their human resources, and assets, it can begin by making the Japanese market more accessible, and cheaper to enter. Intensify competition, and there will be a better chance for higher salaries.
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I think Japan, Canada, and other holdouts are wise not to jump into the AIIB right away. As stated in the article, an institution led by a thug-like, authoritarian regime will have problems dealing with western democracies on such a close level.
0 ( +1 / -1 )
Indeed, about half of Japanese firms in the survey worry a trade deal would bring about fierce competition with products and services from overseas
The ownership of these companies should then pack it up. Competition brings not only better prices, but, innovation. Then there's the potential for more jobs being created.
0 ( +2 / -2 )
Absolutely...wrong. They were "FINANCIAL" crises, not "fiscal" crises, for one... and they took place in countries where the financial sectors were nearly entirely run by profit-seeking private-sector firms operating wholly on free-market principles with light-touch regulation.
JeffLee, the font here is small-ish. I used the word "FIASCO" not fiscal. I have to disagree. Free market doesn't mean "anything goes". Those private sector firms didn't follow the rules, clearly.
The "financial" instruments that had been peddled weren't the result of sound business planning, or practices. They engaged in a glorified form of gambling, and guesswork. Totally unsound.
The bankers you deride (and rightly so) aren't paragons of free market economic. They tried to make profits using very dubious ideas, and ethereal concepts that could never work in the real world.
In fact, the US government had been warned in 1992 that the financial crisis would happen. This shows that government isn't always acting in the interests of the economy, or even thinking of them.
China's banks are not. They are govt controlled and owned. And China doesn't have financial crises despite a rocketing economy. Lucky them, poor us.
Yes, but, there's a looming debt crisis in China which could send its economy off the rails. Also, China's governments favour mostly state owned enterprises. There's also massive abuses of its labour force which haven't been fully addressed or resolved.
Workers who assemble our smartphones have contracted cancer, and other illnesses forced to work insanely long hours, all while under the communist government's watchful eyes. The state certainly isn't going all out to help them. The Chinese government, for centuries, has been callous to the needs of its people. Peaceful protest is often met with extreme violence
I'd say, lucky US, poor THEM.
When you think of free market economics think more of people like Bill Gates, Dave Thomas (founder of Wendy's), Mark Cuban, Elon Musk, TD Bank CEO Ed Clark. Read up on thinkers like Adam Smith, and Friedrich Hayek.
Better still, think of people you know who are self-employed, or have started a small business of some kind. What's wrong with being more self-reliant, and better paid for a day's work?
Quantitative easing, stimulus spending, and over-regulation haven't led to substantially higher salaries, or investments. Higher consumption taxes only limit the buying power of those with median or low incomes. PM Abe talks about a "virtuous cycle of consumption" yet does all he can to prevent that from happening.
The Japanese government, like most governments, have no sense of how the average person experiences the economy. The members of the Diet by their wealth, their salaries, and gold-plate state retirement packages, are isolated from the economy.
Your trust in the fallible people who comprise the government is misplaced. Better to look to entrepreneurs, workers, and investors to revive the economy than an untrustworthy institution that has achieved nothing but economic malaise.
0 ( +0 / -0 )
The opposite is more often true. When Japan's economy was more fully govt protected and managed, in the postwar era, it was a stellar performer and the envy of the world. Growth skyrocketed.
Look at the last 20 years or so. Better still look at the last 3 years. The government may have done a stellar job after the war, but, has long since dropped the ball. Japan's economy is over-regulated, its big industrial powers too sheltered, and is being crushed by public debt.
After the 1991 blowout, created by the private financial sector, numerous moves have been made to "liberalize" and "globaize" the economy. The results have been negative or sluggish growth.
Clearly not enough moves have been made to "liberalize" and "globalize". Japan's entrepreneurial class remains relatively small considering its population. Business taxes were at 40% until recently, and are still too high at %35. The government is strong-arming companies into giving higher wages instead of foster a better business environment that makes substantial wage increases feasible.
The government's track record, in this century, has been lackluster at best. Deficit spending, and taxation aren't the paths to growth.
China's communist dictatorship "manages" an economy where 7% growth is deemed "sluggish." All its banks are govt owned, we should note.
Glad you see the communist party in China as it is. However, the government also favours state-owned enterprises over privately held firms. Access to that economy is very restricted as well.
Also, note, that China's growth began with a loosening (however slight) of government controls. China also has a very strong entrepreneurial culture. Though governed by a thug-like communist party, the Chinese people are, at heart, capitalists.
The financial fiascos of the 90s, and 2008 were not a representation of free market economics; they were an aberration of them. You're dwelling in the past rather than looking at the potential that free market economics has to deliver people from poverty, and save economies.
The government is comprised of legmen working on the behalf of vested interests, not for the economy at large. Looking to it to drive the economy is a big mistake. Better that it move aside, and allow businesses, consumers, and investors do the heavy lifting.
-1 ( +0 / -1 )
JBinJapan Government intervention is also why there aren't any Ford, Chrysler, or Hyundai dealerships in Japan------ Nonsense, There is nothing stopping overseas car companies setting up in Japan.
"Nonsense". That's a bit overwrought.
The Japanese government is quite protectionist, to say the least. There may well be Fords, and other consumer market cars here, but, their presence is very, very small. The government certainly doesn't throw open the doors to the Japanese market all the widely.
There may well be no overt barrier to foreign made cars, but, the Japanese government does make it easy, does it?
You're missing the overall point of my post, however. Government intervention isn't always helpful. Certainly when it involves strong-arming private businesses, or kicking consumers in the teeth with taxes.
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If it weren't for government "intervention" over the years, a majority of those "private businesses" wouldn't be around today.
Then, JeffLee, it's even more imperative that the government ease off on its interventionist tactics. A lot of these big companies are way too dependent on government to help them.
Government intervention is also why there aren't any Ford, Chrysler, or Hyundai dealerships in Japan. It's why drivers have to buy new cars every seven years. The list goes on and on.
A liberalized economy is going to grow much faster than a government managed one.
3 ( +5 / -2 )
Rather a slavish move by these companies: giving pay raises because the government says so...
Certainly, I have nothing against higher wages and extra 48000yen or 60000yen per year isn't much, but it's better than nothing.
Unfortunately, a raise pay invariably means a raise in taxes on that income, both federal and municipal, thereby negating, if not severely limiting whatever limited benefits from the meager pay increase.
The business community should pressure the Japanese government, at all levels, to further reduce taxes on profits, and income across the board. Tax cuts would give the wage increments more meaning, and impact
The government in the meantime needs to stop such interventionist tactics on private businesses. PM Abe's argument to business is essentially, "please alter your practices and policies so that my policies can work."
Government shouldn't be the driver of the economy, and the members of the Diet need to embrace more free market, free enterprise approaches so the economy can grow more robustly.
1 ( +7 / -6 )
The Japanese government ought to reform its tax regime instead of penalizing people for protecting their hard earned money. If Japan, and many other countries, had more responsible tax laws, then the number of people leaving for better business environments would certainly decrease.
The Japanese government, like many others, collects a gargantuan amount of revenue from taxpayers. The problem is the government imposing taxes without any regard for the economy. Taxation doesn't help economies; it hurts them. It forces investors to move their capital away from where its needed. It
-1 ( +0 / -1 )
Professionalism and criminal checks is a must. When you get in a taxi you at at the mercy of the cabbie, that's why I would never use Uber - a rag tag of dilettantes who could be convicted sex offenders, muggers, alcoholics, druggies
A trifle over-wrought, and baseless Ms Heath.
There’s no doubt about Uber taxi service was breaking the transport law in most of countries where Governments have issued Taxi License to Taxi Company or individual Taxi owner.
Uber is also giving consumers alternative to the traditional taxi industry. Having a license to drive a taxi doesn't make one a better driver, or more knowledgeable about a city.
There's nothing altruistic in the government's actions here. An established, complacent industry is facing a disruptive, and competitive force, and is using trivial regulations to block it instead of competing.
Uber, and services like TaskRabbit, Medicast, etc, are examples of free enterprise, and free market economics. They democratize markets once controlled by a select few.
This is the future of the workplace, and of the economy. It should be embraced, and supported, not stymied at the behest of special interests.
-1 ( +0 / -1 )
Extreme monetary easing has been the linchpin of the “Abenomics” economic revival strategy, along with strong government spending and sweeping reforms
That's Abenomics' failure. If Japan is going to see better growth, demand has to go up. Nothing in Abenomics leads to higher take-home pay. Allowing the consumption tax increase to go through was reckless, and limited, if not negated, Japan's growth potential (however meager it might have been).
PM Abe's economic policies are unimaginative, ineffective, and, ultimately, will result in a worsening economy, not a growing one. Hold the line on taxes, or cut them, rein in spending, and liberalize the Japanese market. Join the TPP, or start more robust trade deals by itself.
Abenomics is poorly named as it doesn't really focus on fixing the economy. It's a show piece, not a comprehensive set of reforms to revive the economy.
3 ( +3 / -0 )
Like many governments, Japan's is pandering to established, traditional taxi services. Unless one is a stunt driver, being "a professional" isn't exactly a requirement. Considering that many of Tokyo's taxi drivers don't know where to go, professionalism isn't really a factor.
Uber is a user/provider centred app with great flexibility for both the customer and the drivers. It allows people to make a living, or supplement their income, and its self-regulating.
Self-regulating entities aren't popular with government which prefers tighter control, and power. The transport ministry is only doing Japanese a disservice by banning Uber.
-1 ( +3 / -4 )
If the government allows working people to keep more of their income, there would be more discretionary spending, making the consumption tax actually work the way it's supposed to.
That wasn't the case, hence the deflationary spiral.
The operative word is "if", nigelboy. The Japanese government has long taken a large chunk out of people's incomes. The deflationary spiral is the result of declining incomes, and low confidence in the economy.
Allowing working people to keep more of their income would deliver more economic benefits to a far wider range of people, faster, than stimulus spending (i.e., deficit spending) or tax hikes.
if the economy wasn't good enough to take the tax hike when it was brought in, when would it have been?
Good question, fxgai...but, a better one would be "How can the economy be fixed so it can handle a consumption tax hike?"
Raising the consumption tax was essentially kicking the economy when it was down. A fiscally responsible approach would've been to cut wasteful spending.
Countries around the world have raised taxes on consumption, profits, property, and income, yet remain crushed by high debt, and, worse, poor economic growth. We have gone well past the point where tax increases can be effective.
PM Abe's goal is one that is supposed to be about economic revival, and fiscal responsibility, yet he has done everything to ensure none of these happen.
1 ( +1 / -0 )
They are. Balancing the budget and reviving the economy are polar opposite ends where if one tries to do both, it results in a recession.
Not necessarily, nigelboy...If the government allows working people to keep more of their income, there would be more discretionary spending, making the consumption tax actually work the way it's supposed to.
Cutting business taxes down to about 15% to 20% (along with tax incentives) would make robust investment, and higher wages that much more feasible.
These two scenarios would more likely lead to higher investment, and discretionary spending which generate more revenues. Forcing more taxation on consumers with stagnant incomes simply won't deliver the kind of revenue the government needs to balance the budget.
The Japanese government is very much like all other governments in the developed world: it imposes too many, and too much taxes on its citizens. No government in the G8 can say it doesn't levy enough taxes.
Much of your argument assumes the government doesn't collect enough money via taxation. That simply isn't the case. People in Japan pay a lot of taxes on income, property, profits, and more.
If the economy is going to be revived, the government has to get off people's backs, and out of their pockets. It has to hold the line on wasteful spending, eliminate inefficiencies, incompetence, and/or corruption.
0 ( +1 / -1 )
But that was much weaker than the growth of about 4 percent expected by most economists, showing the reluctance of consumers and businesses to spend and invest.
This shows how little economists know about consumers, and businesses. Salaries are stagnant, or growing meagerly, so how can consumers spend more of their strained incomes? The average person sees economic growths as more jobs, and better take-home pay.
Businesses and consumers have "reluctance" because there's no room in their budgets, or no confidence in the economy.
1 ( +1 / -0 )
The weak yen is good for us and other exporters, in turn good for manufacturers too who ship off shore, as can be seen by the increase in machinery orders.
A weak yen is good for us? Yes and no.
A low yen benefits exporters, and firms with overseas business. Toyota, Sony, and the rest of them are happy. You're right there.
However, it hurts those who import goods, like fruit, lumber, and steel. Also, the weak yen's negative impact is mitigated largely by low oil prices. If oil goes back up again, a weak yen could hurt Japan's economy by driving up energy costs.
I know a lot of people in business who are much happier now than prior to Abe coming to power. Not just exporters either
That might be true, especially if those business people work for large, established corporation with deep coffers. However, for consumers, small businesses, and importers, the situation has got worse.
The Japanese market remains over-regulated, and distorted to favour incumbent companies over start-ups, and foreign investors. Taxes on business remain high at %35; incomes also remain heavily taxed, and stagnant.
PM Abe, so far, has done more to hurt the economy than help it.
0 ( +0 / -0 )
Prime Minister Shinzo Abe and his economic ministers are piling pressure on companies to raise wages to sustain growth as the economy climbs out of a recession triggered by a sales tax increase last year.
"Please pay higher salaries so our policies will work" is what Abe and his "economic" ministers are telling businesses. Assuming wages are increased, the rise will be meager. Also, higher incomes mean taxation will negate much of the benefits of a higher salary.
If companies are to raise salaries, more work on free trade, and business tax cuts needs to be done. The government, at all levels, should also commit itself to not hike income taxes if wages go up.
Liberalizing the economy also has to happen. That means openning the Japanese market to foreign investment, and trade.
The problem with PM Abe's policies is that they're all designed to make the government the driver of the economy. This is an anachronistic, and very socialist approach to government intervention in the economy. The state should be a facilitator, not an actor in the economy.
0 ( +0 / -0 )
The tax rises are aimed at paying down Japan’s enormous national debt, but they have put Abe in a tricky position as he tries to balance them with his growth plan.
As stated so articulately by fxgai, the spending has to be reined in, and, so far, that's not happening. The government continues its programme of deficit spending as though economic growth can only be driven by the state.
PM Abe is showing himself to be a self-defeatist leader, enacting policies that work against his goal of economic revival, and a "virtuous cycle of consumption". There's no incentive for people to increase discretionary spending in a way that will make a difference.
Incomes are essentially stagnant, and without cuts in income taxes, or pay increments, raising VATs only makes the consumer feel that much poorer. Abe has failed to help working people, worse, his policies negatively impact the buying power of families and individuals.
Saying Japan is out of a recession is premature, unless you're an economist. In real terms, the recession continues.
2 ( +3 / -1 )
This unregulated, neo-liberal model just lowers the wages for all taxi drivers by spreading the crumbs around, as part of the global spiral down, while a few entrepreneurs with little overhead and a handful of employees take huge profits. Hopefully the authorities here will ban Uber as they have in Thailand, Holland and Spain.
Banning Uber, effectively limiting competition, would be a disservice to Japan's consumers. Taxi companies simply have to adapt, and compete more than ever now, instead of colluding with one another to fix prices.
Thailand, Holland, and Spain banned Uber at the behest of large taxi companies, not on behalf of consumers. Uber's success or failure should be up to consumers to determine, not governments serving special interests.
In this new economy, self-employment is now more viable, and Uber provides a platform for people to make a living, or supplement existing incomes. What is wrong with that? Liberalizing the economy would go much further to improving it for more people than staying with the status quo.
0 ( +0 / -0 )
Core consumer inflation is likely to head toward the BOJ’s 2% target from around October as companies raise wages and prices reflecting improvements in the economy, he added.
Morimoto is making big assumptions when he predicts wage hike. First, companies may opt not to give pay increments at all. Confidence in the economy is very low, so it's likely whatever meager saving received from the meager business tax cut will be banked.
Second, assuming pay raises are feasible, the increase in pay won't exceed the increase in prices due to the consumption tax hike. Also, without significant cuts in income taxes, not to mention taxes on property, the difference in salary will be meager.
If the government is serious about raising incomes, and inflation, it has to cut taxes across the board. That means resetting the consumption tax back to 5% (which is very reasonable), and allowing working people to keep more of their hard earned salaries.
0 ( +0 / -0 )
That's because of the consumption tax hike, a separate policy. The economy started to recovery by 2013. In the US, three rounds of QE helped the American economy to bounce back and grow again.
The consumption tax made a bad situation worse, yes, but, the economy was still in a sorry state even before the consumption tax was needlessly increased.
QE is not "printing money." Japan has engaged in QE for 15 years, and the yen has gone up, down and sideways, and even high a record-all time high.
The yen has also tanked since 2013. It is way too low right now. Fair enough, the world views the yen as a stable currency, so its value doesn't necessarily reflect the Japanese economy, or government finances.
apan has been engaged in free market reforms ever since the bubble burst. Guess what -- they haven't worked.Labor reforms created the "working poor" underclass, to site one of many examples.
Free market principles don't work? How do explain the success of the US, Britian, Canada, and many western economies over the years. Look at some African countries whose growth has been, in large part, the result of hard work, and entrepreneurial endeavors.
From your comments, you seem to tack left on economic issues. While socialism has some merits, it hasn't brought about full employment, or ended income inequality. The bankers of the US aren't the representatives of free market reforms, their just glorified gamblers who place bets with other people's money.
When I say free market reforms, I mean reducing red-tape, and needless government intervention. A liberalized economy enables the poor to get out of poverty.
When protectionism was in vogue, Japan's economy was a stellar performer and the envy of the world. The rot set in after the free-market reforms got under way.
Yes, but, consumers were shafted with needlessly high prices, and lack of choice. Entrepreneurship was discouraged, and what Japan had, and still has, are near-oligarchies with near exclusive access to the Japanese economy.
Free trade not only helps business, but, keeps international relations at an even keel. Japan and China, for example, are in conflict over a bunch of islets in the South China Sea. However, that conflict has remained political, non-violent, because both sides understand an armed conflict wouldn't produce any winners.
Free trade also brings with it jobs, and competition. Competition fuels innovation, and improvement. The "rot" set in when a collection of elitist politicians tried to control the economy, implementing tax policies that hurt small business, families, and start ups. Worse, their deficit spending engulfed the country in debt that will take thousands of years to pay off.
0 ( +0 / -0 )
Then you don'T understand how QE works. The purchases keep the interest rates low, which lowers companies' capital costs and entices institutions to put their newly acquired money into forms of investment other than safe bonds, like stocks, making it easier for listed companies to expand and invest, thereby creating more jobs. The low interest rates also lower the cost of mortgages for regular folk.
Well, thanks for the insightful, albeit condescending response. However, that's how QE is intended to work, but, not necessarily what happens.
The Japanese economy is still in the dumps, despite three years of QE. The BOJs bond purchases have not achieved the kind of growth needed to revive the Japanese economy. The country slid into a recession last year, and shows no signs of any meaningful recovery.
It may well may well benefit listed companies, but, what about small business, and start-ups-firms that don't necessarily have a huge number of bonds? What about working people who struggle to meet rising costs with stagnant salaries, low pay increments, and excessive taxes on their income?
Printing money just devalues the currency, and makes imported goods more expensive. Japan is fortunate that oil prices have gone down by %50. Buying bonds is favouritism and benefits a select few, it uses taxpayer money to fill the coffers of private companies, and doesn't guarantee the funds are invested in new ventures, or people.
If the government wants to facilitate growth and investment, it can cut taxes on business and income, sign free trade agreements, liberalize their markets, reduce waste and spending. It's better to apply free market solutions to economic problems than to use the kind of financial voodoo the BOJ practices.
The private sector, usually the banks, have created all the financial crises in recent times and the massive wealth destruction. They then turn to the government and central banks, which then must issue corporate bailouts and stimulus to fix the mess
No one denies that banks, especially in America, have done their fair share of economic damage. However, politicians had choices in how to respond to financial crises. Tighter regulations that protect consumers' money from being used in risky financial instruments, indictments of reckless decision makers, etc. Instead, they just bailed them out, and allowed business as usual to go on.
However, let's look at the larger picture. Government does hinder growth through unfair tax regimes, raising taxes needlessly (like Japan), runaway spending, protectionism, and over-regulation of the market. The decision to raise the consumption tax in Japan is a perfect example of government impeding growth, and hurting consumers.
It's all well and good to point out questionable business decisions in the private sector, but, giving government a pass for bad policy making just glosses over the main problem.
0 ( +1 / -1 )
I don't see how buying bonds from governments, and wealthy corporations will lead to higher wages, more investment, and more discretionary income. Bond buying benefits only those who have a large number to sell. The average European citizen will not be much better off in the long term, if at all.
Politicians and governments have done more to hinder growth than spur it. Out of control spending, reckless taxation, incompetence, and corruption-these are what governments have given us.
The economic recovery has to be market driven. Allow working people to keep more of their income, and businesses their profits (especially small business), and hold the line on spending.
Bond buying, quantitative easing, deficit spending = economic malaise.
0 ( +1 / -1 )
Abe advisors seem more like political pitchmen trying to pass off snake oil as a curative. Salaries aren't going up significantly, taxes are on the rise, spending remains unchecked, and the economy is heavily regulated.
It's time for Abe to admit his economic experiment is failing, and get to work on improving the economy for the country as a whole, as opposed to just bankers. Free trade, liberalizing the Japanese market, and tax cuts are vital if the economy is going to have any kind of recovery.
0 ( +0 / -0 )