Skip to comments.Japanese Prime Minister Abe orders economic stimulus measures
Posted on 09/11/2013 9:13:53 AM PDT by DeaconBenjamin
Prime Minister Shinzo Abe ordered his government on Tuesday to craft measures to bolster the economy to cushion the impact of an increase in the national sales tax.
Buoyed by data showing the worlds third-biggest economy recovering briskly and a successful trip to secure the rights to host the 2020 Olympic Games, Abe wasted no time in preparing the groundwork for the April tax increase.
He told cabinet ministers to compile strong measures as a package, including growth strategies, by the end of this month, Economy Minister Akira Amari told reporters.
The timing means the measures will be decided by Oct 1, when the premier is to formally rule on the tax increase, Tokyos first meaningful step to contain its ballooning public debt - considered key to maintaining investor confidence.
Abe is proceeding cautiously as many politicians blame the last tax hike, in 1997, for plunging the country into recession. The economy has improved smartly since Abe came to office in December on a platform of fiscal stimulus, monetary easing and growth-promotion measures, but the rebound remains fragile.
Still, the spending package, likely to exceed 2 trillion yen, and measures including corporate tax relief show that Abe is moving toward the tax hike - the first stage in a planned doubling of the levy to 10% over two years.
Strong economic data have weakened the position of Abes outside advisers who argue Japan should more decisively escape from deflation before the government raises the sales tax.
Apart from whatever the prime minister is thinking, the mood is certainly forming that the tax increase is unavoidable, said a person close to a senior ruling party official.
Abe did not specify the size of the stimulus but said it would need to be enough to counter the economic drag of the tax increase, Amari said. That means the package must be 2 trillion yen or more, Amari has said previously.
Abe is trying to balance his top priority of ending 15 years of deflation and tepid growth against the need to get a grip on Japans public finances. At more than double annual GDP, Japans public debt is the biggest in the industrial world.
The bond market has long given Tokyo the benefit of the doubt, but policymakers fear that any concerns over Japans commitment to fiscal reform would crush bond prices and send interest rates spiking.
The government on Monday sharply raised its estimate for second-quarter economic growth to an annualized 3.8% from the previous three months. The numbers included a sharp improvement in corporate investment in equipment and software, considered vital for a durable recovery.
Finance Minister Taro Aso, a major proponent of the tax hike, said Japans improving indicators showed there would be no problem in raising the sales tax as scheduled.
A law passed last year calls for the government to raise the sales tax, similar to a goods-and-services tax in other countries, to 8% in April and to 10% in October 2015. But the law requires the government to confirm that the economy is strong enough to weather the blow.
The law clearly says the tax will rise by 3 percentage points and then by 2 percentage points, so government ministries will be operating under this assumption when they start thinking about steps to offset the damage from the tax hike, Aso said.
The package also is expected to include payments to lower-income people to promote housing purchases and long-discussed tax breaks for companies that increase capital spending, said a government source involved in the process.
The timing for a tax cut will hardly ever be better.
In addition to Abenomics boosting growth and the Olympic win providing a feel-good factor and hopes of more economic activity, Abes ruling coalition secured full control of the legislature in a July election and has three years until the next polls.
Aso, a former premier, and Bank of Japan Governor Haruhiko Kuroda have come out strongly for the tax increase. A panel set up by Abe, as well as his partys tax commission, have signed off on the hike and turned their focus to economic measures to blunt the negative impact on growth.
Japans top business lobby, Keidanren, has also thrown its weight behind the tax hikes, arguing that backtracking would hit business confidence and lead to market turmoil.
Still, Koichi Hamada and Etsuro Honda, two academic economists credited for shaping Abes reflationary thinking, argue that Japans recovery was still missing critical components such as sustained increases in wages, corporate investment and consumer prices.
Because it has worked so well in the past. /sarc
In the beginning was the plan.
And then came the assumptions.
And the assumptions were without form.
And the plan was without substance.
And darkness was upon the face of the workers.
And they spoke among themselves saying,
“It is a crock of shit and it stinketh.”
And the workers went unto their supervisors and said,
“It is a pale of dung and none may abide the odor thereof.”
And the supervisor went unto their managers and said,
“It is a container of excrement and it is very strong, such that none may abide by it.”
And the managers went unto their directors, saying,
“It is a vessel of fertilizer, and none may abide its strength.”
And the directors spoke among themselves, saying to one another,
“It contains that which aids plant growth and it is very strong.”
And the directors went unto the vice presidents, saying unto them,
“It promotes growth and is very powerful.”
And the vice presidents went unto the president, saying unto him,
“The new plan will promote the growth and vigor of the company, with powerful effects.”
And the president looked upon the plan and saw that it was good.
And the plan became policy.
This is how shit happens.
Stupid is as stupid does. Go for it, Japan!
How did it happen that about 20 years ago, the Japanese became total economic illiterates? Are there no Supply Siders at all in Japan?
The Japanese Government has hired Paul Krugman?
When a junkie first sticks the needle in his arm and shoots up, he gets a rush. Once he’s completely addicted, he shoots up and gets no high. Just like American Socialists, Japan is now a complete government spending addict and no longer gets any impact from spending.
1) alot of asia picked up on the Japanese model, first korea, then china, now Vietnam. Export to the US, start out with low quality consumer goods, work your way up the manufacturing value chain. So the Japanese got blown out of some very profitable markets by lower cost producers who made goods of comparable quality and followed the same business model.
2) the generation of politicians and industrialists trained by the US post WW2 retired. I’ve never seen a study or book on this, but I’d like to know whether or not Japan has reverted to its more traditional commercial practices and how those differ from the postwar generation’s. Simply a gut-level instinct, but my completely unsubstantiated guess is it has been a factor.
3) banks and a real estate bubble, and the government was in the pocket of the banks who did not want to be forced into liquidation. so financial corporation revenues went to debt service instead of commercial loans. sound familiar?
4) the Asian concept of face/keeping up appearances. you can go broke, or at least experience a significantly diminished standard of living, trying to maintain it. and its not just asians, ask the british aristocracy, Austria, argentina and millions of americans with high debt to income ratios and maxed out credit card balances.
They exported cars & Stereos to use
We exported Liberalism to them
We exported Liberalism to them
Tax increases are addictive to politicians.
For those politicians who say they will raise your taxes; they set that expectation in others and surround themselves with deceitful folks who justify it the same way; who will ensure that taxes are raised again when the REVENUES FAIL FROM THE FIRST TAX INCREASE.
PREDICTION: Japans economy will decrease with each tax increase. Projected Revenues from the increases will fail to meet expectations. TAX REVENUES MAY ACTUALLY DECLINE FROM THEIR PREVOUS STATES.