Japan- New Budget, Issuing Debt Worth More Than Tax Receipts 2nd year In A Row

Discussion in 'Economy' started by Trajan, Jan 1, 2011.

  1. Trajan
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    Trajan conscientia mille testes

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    if they don't reduce spending you're screwed, if they reduce spending they're screwed, in short they are screwed.



    Japan's Proposed Budget Strains to Curb Debt, Spur Growth


    TOKYO—The hard-pressed administration of Japanese Prime Minister Naoto Kan has unveiled its budget for the fiscal year starting in April, narrowly abiding pledges to limit spending and borrowing, but winning few plaudits from analysts who said it wouldn't make much headway in solving long-term fiscal problems or spurring growth.

    Such is the dire state of Japan's fiscal situation that the budget announced Friday, totaling 92.4 trillion yen ($1.11 trillion), continues to rely more heavily on revenue from new bonds, projected at 44.3 trillion yen, than on all tax receipts, estimated at 40.9 trillion yen. The remainder comes from one-off funding from various government accounts and other nontax revenues.

    Mr. Kan has pledged to limit core spending and debt issuance to this year's levels to show his administration is tackling Japan's debt problem. Japan's public debt has swelled to roughly twice its annual economic output as a result of nearly two decades of economic stagnation and numerous fiscal stimulus packages.

    "You can hardly call tax revenue of 41 trillion yen and the borrowing of 44 trillion yen a stable fiscal policy," said Masayuki Suzuki, economist at Dai-ichi Life Research Institute. "The government has to either cut its spending or increase its revenue, or both."

    Getting a grip on the debt has proven to be tough. Because of larger debt-servicing costs and social-security payments, the planned total spending is the largest on record, topping the previous record of 92.3 trillion yen in the current fiscal year's budget.

    Efforts to cut expenditures have met stiff resistance. The export-dependent economy is dogged by deflation and a strong yen, making it vulnerable to another slump if spending is reduced too sharply.

    "The economy is currently at a standstill," Finance Minister Yoshihiko Noda said. "It was certainly necessary for us not to focus only on fiscal rehabilitation, but also focus on projects that could help overcome deflation and generate growth."

    Japan's Proposed Budget Strains to Limit Debt, Spur Growth - WSJ.com
     
  2. Toro
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    Toro Diamond Member

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    Japan's tax revenues will equal social security payments and interest on the debt and nothing more. It's savings rate has plummeted and the working population has peaked.

    Japan is a disaster waiting to happen.
     
  3. william the wie
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    william the wie Gold Member

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    The questions about disaster are when will it happen and how will it affect the US. And some of the defensible positions on the subject are really off the charts. I posted that S&P thread on several boards and the answer I got from my old blog publisher shocked the crap out of me 2600 for a high and a low at the opening based on national defaults. Given Mike's performance in Precious Metals futures I listen very carefully to what he says. As best of the worse the US may very well see a financial boom in the coming year as a result of the Japanese collapse which may not be the first domino to fall in the coming year.
     
  4. Trajan
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    Trajan conscientia mille testes

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    theres a lot of that going around.

    If I were a pessimist with a fairly knowledgeable grasp of history I'd say another 2-4 years at this level of economic global awfulness coupled with a major incident with regional impact on par with say; Sarajevo, a major embargo, massive colonial style expansion...war, large scale, very destructive, a reset button if you will........ahhhhh, I'm just crazy.Never mind.
     
  5. william the wie
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    william the wie Gold Member

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    The demographics are wrong. Most of Asia is growing old without growing rich. Most of Europe is seeing its welfare state decline and depopulation taking hold. The US as the best of the worse will avoid much of the resulting disorder.
     
  6. loosecannon
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    loosecannon Senior Member

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    And yet the yen is still stuck in a deflationary trap and demand for the yen hasn't failed in what? 25 years?

    Japan has been on the ropes for a decade at least and nothing bad happens.

    When was the last time that a nation state deserved an AAA credit rating? 1972? Is there a nation state today that deserves even a Caa1 rating?

    There is something to the notions of strength in numbers and relative value. If all the currencies and bonds are equally worthless and risky they might be surprisingly durable in a world that could not be more averse to economic calamity.

    Funny thing is that the only really strong currency in the world today is pegged to the dollar.
     
  7. loosecannon
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    loosecannon Senior Member

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    depopulation is a strength, not a weakness. Nobody with any sense wants a growing workforce or a growing population for the next 50 years, or more.

    Asia's biggest problem by FAR is their huge and still swelling population. Imagine if you had two billion children to support!
     
  8. Toro
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    Toro Diamond Member

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    It's the other way.

    Unless people want to start saving massively, there will be fewer and fewer young, working people supporting older, nonworking retired people, which means that young people are going to have to pay more and more in taxes to support the older folks' pensions.
     
  9. Toro
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    Toro Diamond Member

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    The fact that nothing bad has happened for so long makes me more worried that something bad will happen.

    One heard the same argument during the Housing Bubble - home prices hadn't fallen nationally in 60 years, so why worry? Then we had a Minsky Moment.

    A Minsky Moment is coming for Japan.
     
  10. william the wie
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    william the wie Gold Member

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    A large number of doctrinaire Marxist, Keynesian and Austrian economists and virtually all biologists would disagree with that position. The Malthusan formulation was disproven centuries ago by Jethro Tull.
     

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