Fitch says Japan fiscal discipline plan unlikely to lower debt burden

File this under "a dead clock is correct twice a day". They are right that it won't work, but their explanations as to why are meaningless. If the debt Chicken Littles want to reduce Japan's "massive" debt "burden" they have one choice - go after private financial assets, because that is where the money is. Decide whose money your going to take and take it. Anything else is a waste of everybodys' time.

It's nice, but backwards to talk about them failing to meet "fiscal discipline targets".

More straight forwardly, this is pure government mismanagement based on fantasy and delusions, rooted in short-termism.

Making a new long term fiscal plan every year, but never achieving goals, constantly pushing them back, or watering them down, is quite possibly going to lead to bigger problems at some point. It is unrealistic for the government to even claim to expect people to spend their money freely with such uncertainty hanging over the long term future.

Fitch Ratings downgraded Japan’s credit rating in April by one notch to A, which is five notches below the top AAA rating,

Moody’s rating on Japan is A1, which is four rungs below the highest rating.

Luckily for the J-government, Fitch's and Moddy's ratings are pretty meaningless, since the BOJ and other large domestic concerns like insurance companies and banks will continue to buy the bonds. But in many countries, this would be highly problematic, since many large purchasers of bonds have covenants that prohibit them from buying bonds rated at A or A1. Or at least restrict the % they can make up of their holdings. Which makes me wonder why the "private fanancial assets", Guy is talking about, would want to purchase them, especially since they have such a low rate of return.

and then lowering the debt-GDP ratio, which is the worst in the world at around twice the size of Japan’s $5 trillion economy.

Japan's $5trillion economy? unchanged since bubble economy era? No, instead its going up at from Y500trillion to Y600 trillion (at current exchange rate) amid deflation/recession/lost three decades (?!) unbelievable.

"Which makes me wonder why the "private fanancial assets", Guy is talking about, would want to purchase them"

He's talking about taxes. In Japan the big public debt equals the big private surplus. If you want to balance the budget (fix Japan's "tattered finances"), the logical move would be to remove the assets from the private sector and give them to the public sector (the govt).

Or you could just say, "deficits don't matter" and just get on with life.

Which makes me wonder why the "private fanancial assets", Guy is talking about, would want to purchase them, especially since they have such a low rate of return.

Article is about reducing government debt, not selling more bonds. Which would be increasing government debt. Not understanding the difference would likely explain the reason why the person making the above comment was wondering about what I was talking about.

In these times we hear talk of negative interest rates and euphemistic 'haircuts' so when the Jspanese government starts the big grab then all the foreigners will start to panic and run! NB Remember not to keep any assets you can't afford to loose in Japan

Article is about reducing government debt, not selling more bonds. Which would be increasing government debt.

Guy, wrong, as usual. The article is "about" Japan's bond ratings -- which is about its debt. Which Fitch lowered due to its apparent lack of fiscal discipline.

Not understanding the difference would likely explain the reason why the person making the above comment was wondering about what I was talking about.

Cute, but just more of your verbal semantics. Guess you couldn't answer my question, since the answer is apparently not contained in the one book on economics you memorized.

No, the article is about the debt burden. It says so right in the title.

Luckily for the J-government, Fitch's and Moddy's ratings are pretty meaningless, since the BOJ and other large domestic concerns like insurance companies and banks will continue to buy the bonds.

Aren't bonds like IOUs issued by the government? Meaning, if they issue more bonds, the higher the government/public debt would be?

Article is about reducing government debt, not selling more bonds. Which would be increasing government debt.

The article is about the government failing to meet its "fiscal discipline" targets, so the government WILL be trying to sell more bonds, which will see government debt continue to increase.

Even if the government did meet its "fiscal discipline" target, their target is so pathetic that they would actually still be issuing more bonds, because they will have to in order to pay 10 or more trillion yen of interest on the outstanding debt (10 trillion yen of expenditure which they ignore when formulating their "fiscal discipline" targets, and not counting rollover on maturing debt either).

So yes, the government will be trying to sell more bonds. But "thankfully" because of Abenomics the BOJ will monetize it, and some people will keep their heads in the sand because some fringe "Modern Monetary Theory" they are beholden to says "deficits don't matter".

Modern Monetary Theory does not say deficits don't matter. And the Bank of Japan does not "monetize" anything. As for the government debt not going down because they won't hit their targets and them selling more bonds, yes that is exactly what will happen. One out of three, good work. But the article is about the debt level not ignorance of how the bond market functions. The debt ratings are irrelevant.

Modern Monetary Theory does not say deficits don't matter.

Excuse me, I was wrong about that.

On double-checking I find that an MMT proponent has described the idea that "deficits don't matter" as "silly", and "crazy", and may be a misconception held by "supporters of MMT who might not have got it quite right".

That last bit might be the reason for my misunderstanding.