Aso calls for drastic fiscal reform to balance budget

Japan must tackle drastic reform on both spending and tax revenues

Bad news, as 90% of this will be addressed by raising taxes. After they cut the pay of a few teachers there's nowhere else to go. They certainly can't expect hard working politicians to cut their first class travel expenses and lavish dinners.

Aso calls for drastic fiscal reform to balance budget

Fine, go ahead, both Abenomics & boj are with you 24/7/365 ! Optimistic? NO.

Aso has to do a whole lot more than just pay lip service. Full structural reform of the economics. Tax, education, the culture of benefits and welfare, agriculture to balance the lope sided retail sector. Above all government. The economic climate in Europe is frankly a catastrophe stagnation and deflation is taking control of whole regions in the south and is politically on a knife edge. The markets will be looking for a safe haven to consolidate and park there positions. The yen is strengthening, yesterday reaching a four week high against the dollar.

Talk talk talk... meanwhile that tax increase is being spent on defense and other non promised things

There is no, has been no, and will be no fiscal reform. The most recent tax imcrease saw an increase in gross revenue, but for every extra yen gsined, the economy lost three yen. The $450 million in extra revenue was negated by the $500 billion spent on stimulus, and the $750 billion yen lost by economic contraction. Future tax increases will only further decrease economic acitivity as more money is siphoned out of the private sector and put into the public secotr.

Despite the need for "fiscal reforms", the current government's new budget is a new spending record, and it will likely not be enough, toward the end of the year one or more "supplamentary" spending programs will probably be introduced, especially if government inflstion goals and/or growth goals are not met (which already looks certain).

commanteer

Japan must tackle drastic reform on both spending and tax revenues

Bad news, as 90% of this will be addressed by raising taxes. After they cut the pay of a few teachers there's nowhere else to go. They certainly can't expect hard working politicians to cut their first class travel expenses and lavish dinners.

Cut the pay of a few teachers haha, that will only realise a handle of coins from your purse, cutting teachers pay is hardly going to do anything to the economy.

But Aso is right Japan must take drastic reform on spending and tax revenues, I suggest they stop spending huge amounts of money on overseas projects to develop other nations, put this money into paring down Japans debt not building bridges in some 3rd world dump.

itsonlyrocknrollJAN. 15, 2015 - 08:47AM JST Aso has to do a whole lot more than just pay lip service. Full structural reform of the economics. Tax, education, the culture of benefits and welfare, agriculture to balance the lope sided retail sector.

Totally common sense, but unlikely that the old garde will be able to untangle itself from all nested interests to go through with this. That the fedora wearing bigot is still able to put out statements itself might be a hint that the prior mentioned is true.

Keeping in mind the so called "Price Stability Target" of 2 Percent BOJ governor could well hit the loud peddle with another bout of quantitative and qualitative monetary easing. The ECB is contemplating likewise, only The Bundestag that insisted from 2016 onwards that budgets will have to be balanced in law, subsequently writing into the constitution, is hell bent on preventing or delaying the programme.

Spend less on wasteful projects, cut the ridiculous bureaucracy, lower taxes a touch (and not just corporate taxes) and print money like billy-o.

Hi warausalesman, it is not going to be politically a walk in the park, but can be implemented in stages. The LDP government have a mandate to finish what they themselves started. The gains from extra tax revenue and cost benefits gained from the easing of energy import pricing would cushion any economic jolt.

A more flexible employment market and tax regime would pay dividends when consumption tax hits 10%, I am not a knocker for knocking sake, I have the bulk of my future invested here in Japan.

Aso calls for drastic fiscal reform to balance budget

Who's he calling on? Aso is the Minister of Finance, Just Do It.

He need merely instruct each ministry that in principle it's budget will be cut by 3% of 2015 levels for each year until 2020. Have each ministry prioritize it's own spending requests, and the low priority stuff doesn't get funded. Incentivise the bureaucrats to do a good job by linking bonuses in their ministry to the results they achieve. If they fail to deliver, no bonus - and perhaps salary cuts instead.

StormR,

I suggest they stop spending huge amounts of money on overseas projects to develop other nations, put this money into paring down Japans debt not building bridges in some 3rd world dump.

The utility of the ODA is perhaps debatable, but the ODA budget is only about 0.5 trillion yen. The budget deficit (including debt servicing) is some 37 trillion yen, so that needs to be eliminated through either cuts or extra revenue before the debt can even start to be pared down. Aso's "extremely difficult" goal doesn't even consider the debt servicing costs in the first place.

Coupled with the spending cuts, it's time to deregulate. The attitude should be "Japan is open for business. We are desperate for you to generate growth here however you can, please do so for the good of Japan, and pay taxes on your profits".

Once Japan is back on the right track it might be able to afford to reimpose some of the ridiculous regulations that they so love here.

Bureaucracy is in the blood here. deregulation hasn't been even started yet because Abe knows he cannot make it happen. anyone who has to deal with a Ministry or one of their agencies in the course of their daily job knows this is a non-starter. and as for the "women in work" initiative, there are plenty women in work but the problem is very few of them ever make it anywhere near the top. Those of us who work in large organisations with Japanese colleagues can testify that their female colleagues are just as capable (if not more so) than most of the men (especially old geezers) we work with. Tax and spend has manifestly failed but not sure that Abe/Aso are capable of doing anything else (except forcing Kuroda to print money to buy JGBs) the 10year at under .25% is manifestly ridiculous and the result of manipulation. KinYuCho should be arresting the whole lot of them for market abuse.

Japan could raise the consumption tax to 30% tomorrow and it still wouldnt balance the budget, only massive spending cuts and a huge tax hike will fix the problem. I dont see the J gov doing that anytime soon

Just like he did when he was PM.

No comments here, yet, from JapanToday's fiscal policy extremists, who argue that debt don't matter.

Even this Paul Krugman chap, who seems to be the poster child of those in favour of government "stimulus" spending, seems to agree that Japan's fiscal situation isn't sustainable. He just thinks it's not the short-term priority. Maybe he's right (we can but hope so!), but personally I don't know how I'm supposed to want to go and spend all my savings given the uncertain future that Japan's unsustainable fiscal trajectory is on. But then I'm perhaps just extreme in the other direction.

After they cut the pay of a few teachers there's nowhere else to go.

Before talking about things you dont know about please do some research first. Teachers are government employees and are paid according to scale along with the rest of all the government employees in Japan. Teachers are not in a special bracket, if teachers get cut, then ALL government employees took a cut. The only difference is that there are national government employees and regional.

BTW there are plenty of other places to go, number one CUTTING the deadweight government employees including teachers from the tax rolls and more savings would occur.

StormR, I'm glad you understood my joke about the teachers. Of course the government shows no inclination to cut expenses. Raising taxes is easier, as only the working people suffer, but also will do nothing to address the situation. There is simply not enough money among Japan's shrinking population to pay off all that debt, whatever the tax rate is. (You do know that tax rate increases stop being effective above a certain point.)

90% of the government is deadweight, Yubaru. Japanese have become complacent, and the government has put the country so deep into a hole that no reform or tax increase can dig them out. The only option is what Abe is doing right now, devaluing the yen. When the yen is 350 to the dollar, the government might be able to meet their debts. Of course, Japan will be a much poorer country then. I hope that at least the government will stop paying off their favored zombie corporations and allow innovative businesses to thrive. There is a lot of talent in Japan, and the government/big business cooperative is holding much of it down.

The yen is doing 116.75 to the dollar press ups on my table.Oil and gas hedging primers.......ouch! Not for the faint hearted.

Finance Minister Taro Aso said on Wednesday that Japan must tackle drastic reform on both spending and tax revenues

Will never happen. Too many special interests and too much power in the hands of the bureaucrats. Plus a simply too rapidly aging population rapidly increasing the social-welfare costs, like pensions and medical.

Which is why:

the budget-balancing goal in 2020/21 would be extremely difficult to achieve.

Japan is on an elevator ride down, and the only questions are how fast? and how far?

Pension reform is needed; the gov. pension age needs to go up to 65 or 70.