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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Japan To Cut Policy Spending By 10% Under FY12 Budget

Posted by WARREN MOSLER on August 23rd, 2011

Continuing the policy that got it to where it is:

Japan To Cut Policy Spending By 10% Under FY12 Budget

August 23 (Kyodo) — Finance Minister Yoshihiko Noda instructed other Cabinet members Tuesday to cut policy spending by 10 percent in the fiscal 2012 budget from the current year, aiming to secure funds that would help cover burgeoning welfare costs in Japan and reflect the policy priority of a new prime minister.

The government decided to delay by a month the deadline for its offices to submit their request for the state budget, in a move to concentrate more on reconstruction work following the March earthquake and tsunami.

Noda also ordered government spending of no more than 71 trillion yen ($924.5 billion), excluding costs to service existing debt, in the year starting next April and capping the issuance of new bonds at 44 trillion yen, both at the same level as the fiscal 2011 budget.

But spending and debt issuance necessary for quake-relief efforts will be managed separately from the capping rules, as the government intends to issue reconstruction bonds that would be serviced with proceeds from provisional tax hikes, although there remains opposition to the idea even within the ruling coalition.

The envisaged 10 percent policy spending cut would lead the government to secure 1.2 trillion yen.

Combined with some tax revenue hikes, the government will secure 1.7 trillion yen to cover an annual increase of nearly 1.2 trillion yen in social security costs, which have been growing amid the aging population, and 600 billion yen which would reflect the policy priority of a new prime minister succeeding the incumbent, Naoto Kan, who is certain to step down within this month.

The instruction came before the Cabinet approves in mid-September the guidelines for submission of budget requests by ministries and agencies, a process that has been delayed this year due to the March 11 disaster.

The government offices normally file their requests with the Finance Ministry at the end of August and the government formulates a national budget in December for a new fiscal year starting April 1.

The Cabinet decided Tuesday on a government ordinance to postpone the deadline for submission, effective Friday.

The delay comes as the government focuses on reconstruction work, which has required it to make separate budgetary arrangements. Japan has already implemented two extra budgets for fiscal 2011 and is considering a third that could be bigger than the previous two.

27 Responses to “Japan To Cut Policy Spending By 10% Under FY12 Budget”

  1. gaius marius Says:

    if they can’t learn even on the third time through, how can we?

    i’m of the opinion that we must invent a new word for government “debt”, because thinking of it as debt is a major psychological stumbling block. maybe chris cook’s idea of labeling fiat-floating issuance as consols or even just as an annuity would help.

    Reply

    Mario Reply:

    @gaius marius,

    it’s definitely pretty bad. Personally I think they HAVE LEARNED, they just don’t want to change to make the middle class more stable and prosperous. Just think….if government is doing the capital expenditures then who else can? The banks…and they get all the interest and control too. It’s wealth re-distribution tactics as far as I can tell.

    Reply

    Rodger Malcolm Mitchell Reply:

    @gaius marius, How about just calling it “federal dollars”?

    Rodger Malcolm Mitchell

    Reply

    gaius marius Reply:

    @Rodger Malcolm Mitchell, indeed why not!

    Reply

    hamish Reply:

    @Rodger Malcolm Mitchell,
    Rodger, it’s something you’ve also brought up on your own blog how words like ‘debt’, ‘deficit’ have inherently negative connotations, and from an MMT perspective are probably the wrong descriptors when applied to a Federal Government. I think it is a genuine issue, and I can say from my own perspective it’s a mental block I had to get around to understand where MMT is coming from.

    How about ‘growth funding’ to put a more accurate positive lable on it.

    Reply

    Philip Pilkington Reply:

    @gaius marius,

    Well, what did it take for the world to learn after the Great Depression? Eh, only the biggest war mankind has ever known. It’s enough to make you pretty pessimistic. Add to that the fact that I’ve heard Japanese economists are pretty heterodox in their orientation — not to mention the fact that Richard ‘Fiscal Policy’ Koo is their national favourite — and I really don’t know what to think.

    Oh, and didn’t someone somewhere (maybe Warren) suggest that we should call government debt ‘net private sector saving’. I like that characterisation. That might work.

    Reply

    mike norman Reply:

    @Philip Pilkington, Government debt is private “equity.” The national debt is the national equity.

    Reply

    KKKen530 Reply:

    @Philip Pilkington, Why not call them Federal Certificate of Deposits..Time deposits at the Federal Reserve Bank..

    This Senator From Florida seems to be on the ball,he wants to reform the tax code,and review and modify regulations off government agencies to aid business,but somebody needs to clue him into MMT..


    This young man looks like an up and comer

    Reply

    KKKen530 Reply:

    @KKKen530, Senator Marco Rubio
    Maiden floor speech

    WARREN MOSLER Reply:

    yes, overall, he’s a menace for sure

    KKKen530 Reply:

    @KKKen530, Why do you say he’s a menace ??

    WARREN MOSLER Reply:

    extreme deficit hawk, etc. to a fault. unless i’ve got the wrong guy?

    KKKen530 Reply:

    @KKKen530, Which is why I thought it would be a good idea to explain MMT to him.If he could be brought around to the MMT viewpoint,he’d be a powerful force on our side…

  2. Adam2 Says:

    Gauis – You are correct. It is the word “debt.” Are bank deposits deemed debt for the bank? No one calls them debt but it is the same thing.

    Reply

  3. Tom Hickey Says:

    Looks like most of the developed world is into belt-tightening to lose weight. Next it will be a corset?

    Reply

    Mario Reply:

    @Tom Hickey,

    sounds kinky! LOL

    Reply

    Tom Hickey Reply:

    @Mario,

    Right, B&D and SM.

    Reply

    Unforgiven Reply:

    @Tom Hickey,

    Hmmmm Peter Schiff with a ball gag strapped in his mouth. A GOLD ball gag.

    Has anyone seem my silver spurs lying about? Now Peter, I want you to get down on all fours and tell me about deficit spending again. Is the saddle comfy? No? Too bad.

    Mario Reply:

    @Unforgiven,

    ROFLOL!!!!

  4. roger erickson Says:

    > Continuing the policy that got it to where it is:

    In league with & subservient to Western banker-think. If Japanese bankers turn on their int’l colleagues and act in their nation’s interests, Japanese bankers might not be invited to Davos anymore – or Jackson Hole.

    Reply

  5. Mario Says:

    and look what I just saw today in the headlines:

    Head of S&P to Resign
    Ratings Firm Says Sharma Exit, for Year-End, in Works Before U.S. Downgrade

    wow what a way to go! What a xxxxhead. Apparently we have revolving doors in the private sector now too!!! LOL Talk about wham, bam, thank you maam!!!

    http://online.wsj.com/article/SB10001424053111903327904576525141971060106.html

    Reply

  6. Adam (ak) Says:

    The Japs will woke up when the new Chinese aircraft carrier sails towards Diaoyu Islands.

    Reply

  7. bram Says:

    BBC: Moody’s cuts Japan’s debt rating on deficit concerns
    24 August 2011
    The rating was cut to Aa3 from Aa2, though Moody’s also said the country’s outlook was stable. …

    Reply

    Tom Hickey Reply:

    @bram, Meanwhile, Japan is intervening in the fx market to hold down the yen, since it is concerned that the strength of the yen will hurt exports.

    Reply

  8. mike norman Says:

    Still feeling pressured by the rating agencies. You’d think by now they wouldn’t give a sxxt.

    Reply

    Neil Wilson Reply:

    @mike norman,

    I was actually thinking that with the Yen so high, now would be a really good time for them to simply stop issuing Bonds and buy up any below par for cancellation.

    Reply

    Mario Reply:

    @mike norman,

    ratings agencies are about as systematic as apple barrel divers. LOL

    Reply

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