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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 Fiscal Pressure Rises as Tax Increase Not Enough

Posted by WARREN MOSLER on January 24th, 2012

Good luck to them:

Prime minister Yoshihiko Noda told parliament that he will move to double sales tax to 10pc, saying the future of the world’s third-largest economy depends on tackling its massive public debt.

Mr Noda said the country has “no time to spare” in cutting its fiscal burden.

“It’s impossible for young people to believe that things will get better tomorrow in a society where debts resting on future generations continue growing,” he said. “It is not too much to say that the revival of hope of the entire society depends on the success of this combined reform.”

Japan Fiscal Pressure Rises as Tax Increase Not Enough

By Mayumi Otsuma

Jan 24 (Bloomberg) — Japan’s government said it will probably miss its goal of balancing the budget by 2020 even with its proposed doubling of the sales tax, underscoring the scale of the nation’s fiscal challenges.

The primary budget deficit, which excludes the cost of servicing debt, will be the equivalent of 3.1 percent of gross domestic product for the year through March 2021, the Cabinet Office said in Tokyo today. Hours after the release, Prime Minister Yoshihiko Noda reiterated his call for opposition lawmakers to engage in talks on boosting the sales levy.

Addressing the shortfall through faster growth may be a limited option for Japan, where the central bank has already cut the key interest rate near zero and the traditional boost from a trade surplus last year evaporated — for the first time since 1980. Absent structural changes that boost incentives to spend and invest, today’s report signals further fiscal tightening will be needed to rein in the world’s largest public debt.

“To balance the budget, the rate needs to rise further,” said Takuji Okubo, chief Japan economist at Societe Generale SA in Tokyo, referring to the sales-tax level. “We’ve passed the point where we can soft-land the fiscal situation. The question is how hard the landing is going to be.”

8 Responses to “Japan Fiscal Pressure Rises as Tax Increase Not Enough”

  1. chewitup Says:

    Pretty good way to slow down the durable goods and car sales. That ought to idle a few folks. When you say muddle in Japan, it sounds like mudder.

    Reply

  2. Unforgiven Says:

    China reads the headline and says – “I laughed so hard I cried. This time, they’re invading themselves!”

    Reply

  3. Jonf Says:

    What is the matter with these people? Maybe we are missing some piece of this. Are they engaging in a mutual suicide pact?

    Reply

  4. Tom Hickey Says:

    Not too difficult to see where this is going. Increase fiscal austerity. Economy contracts. Conclude that the austerity measures were insufficient. Ratchet up austerity. Economy contracts more. Headline: “Japan formerly world’s third largest economy.” Then all the economists will conclude that it was the excessive debt that finally came home to roost, instead of realizing it was the “expansionary fiscal austerity” that did it.

    Reply

    WARREN MOSLER Reply:

    right, the carpenter with his piece of wood-
    no matter how much i cut off it’s still too short

    Reply

    Adam (ak) Reply:

    @Tom Hickey,

    Isn’t the core issue that the owners of the productive capital and the financial capital – claims on the current or future production (that is somebody’s debt) simply HATE the idea that the government or the state as the representation of the whole society may create other claims on the current-future production “out of thin air” in the form of fiat money?

    They would do whatever is possible to bury the truth that the government is not fiscally constrained. Just look at Greece and the EU. Greece may fold and everyone will lose but they will not allow for the principles to be violated and ask the ECB to buy the Greek bonds. They will allow for a half of their wealth to evaporate and everyone else can be ruined – as long as their share in the future profits remains the same and there is no competition from the state, they are happy. Deflation and austerity is not an enemy of a real or virtual wealth hoarder. Just look at how these guys are doing in the current crisis. It really doesn’t matter whether this is Japan or Germany or the US.

    Every CEO has a copy of “Das Kapital” under his bed.

    And we must admit that their strategy is working. What about a plan “B”?

    Let’s better think about an alternative for the “99%”. Isn’t it possible to bypass the “capital” and build an alternative, parallel society within the current one? A federation of autonomous cells, groups of people helping each other? Religious groups are an example but I am totally secular and this is not what I want. The true material needs (food and shelter) can be satisfied within the current framework even if the current injustice persists. The main issue is undoing the brainwashing. The level of physical coercion is much lower than it was 200 or 100 years ago and we have modern means of communication.

    Jacek Kuron wrote:
    “instead of burning party committees – create your
    own committees; instead of pleading with the censors for pity – publish books beyond the scope of
    censorship; instead of lamenting that they teach forged history in school – organise seminars and
    teach true history.” (see below for the reference)

    Tom, you are the guy, you know enough about spirituality and human history. Please think about it. I have started grappling with this issue more than 20 years ago but I am too emotionally stupid, not a strong natural leader and what is even more important I still don’t have the clarity how to make an informal parallel structure which will not corrupt itself in 1 years time or won’t be hijacked, is not another religious or secular sect based on braiwashing and is not purely utopian. The story about the collapse of communism is not too encouraging. It was merely replaced by neoliberaism. One of the old leaders of the oposition, Adam Michnik is just a well-lubricated cog in the neoliberal propaganda machine. Jacek Kuron admitted the utter failure of the “peaceful revolution” of Solidarity and joined the anti-globalists before his death.

    NB the same happened with the Colour Revolutions in Eastern Europe. The same is happening with the Arab Spring.

    Please read this, you may find it inspiring:
    http://www.irmgard-coninx-stiftung.de/fileadmin/user_upload/pdf/archive/Hella_Dietz.pdf

    Reply

    Adam (ak) Reply:

    @Tom Hickey,

    … also. A buyers’ strike if supported by a significant number of people would topple financial capitalism and force the authorities to introduce MMT based policies promoting the use of renewable resources in a few months time. Even a credible threat would do. This is how the Tasmanian forests were largely saved – by a consumer boycott of the products of the logging company.

    Do we want to get rid of the Hollywood/Music Industry censorship lobby? Don’t spend a dollar on their products and they will suffocate. If their revenue falls below their costs there is no Music Industry any more. Long before that happens they will be more than willing to negotiate…

    This is obviously a purely utopian idea knowing the level of consumptionist brainwashing of the people but imagine a significant number of middle-class people not buying anything except for the cheapest food and really basic things. Just saving money by hoarding cash or paying down the debt. The Occupy Wall Street protest leading to violent confrontations with the authorities should be renamed to “Deny Wall Street the profits and watch the leeches dying”. The Kalecki’s profits equation can be amended when we realise that workers do not have to consume all the wages.

    The profits in a closed economy without government are then equal to investment + capitalist consumption – workers saving.

    I cannot imagine the FBI knocking to door at dawn like NKVD and telling people to go shopping…

    Yes I know this won’t work. Defeating the enemy within is the most difficult task. But otherwise – aren’t we purely voluntarily enslaved? So perhaps we should not complain…

    Reply

    WARREN MOSLER Reply:

    a bit like saying the voters could change regimes

    Reply

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