Cabinet approves Y880 billion stimulus package

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  • 0

    AKBfan

    More of the same. I guess at least unemployment is below 5%, although not sure that is down to stimulus. More because it takes 4 people here to do what it takes 2 in other countries....

  • -2

    some14some

    Disappointing, should be more, atleast one trillion Yen. why? Abe is going to ease monetary policy anyway !

  • 1

    aquaman

    Dumb and Dumber! Is Noda Lloyd Christmas? No, that must be Abe, because Noda's the one taking real money from the suitcase, spending foolishly, and stuffing the case with IOUs saying "it's all there!"

    Look! Straight ahead! Is that a fiscal cliff? Let's spend our way over the edge! Hurry, hurry, hurry!

  • 2

    davestrousers

    as well as on public works projects following last year’s quake-tsunami disaster

    I've heard that one before.. then they went and spent it on things like promoting the Sky Tree.

  • -3

    YuriOtani

    Like watering a dead plant

  • 0

    globalwatcher

    what thr figure really tells you is that 4.2% of the working population has been unemployed for less than a year.

    US programs provide up to 47 weeks of benefits for laid-off workers who use up 26 weeks of state benefits without finding work.

    Dog is right on. US most recent unemployment data was 7.8%. US Unemployed workers remain on data longer than Japan.

    Well, I hope this works. At least I can say Noda's plan is the correct way to do it. Abe's plan is very, very reckless.

  • 0

    saidani

    At least I can say Noda's plan is the correct way to do it. Abe's plan is very, very reckless.

    Neither have the answers. And Noda is not doing it the "correct" way unless you believe that adding even more debt to Japanese children is correct. Japan has been wasting money on these stimulus for two decades and the only thing it has accomplished is Y1 quadrillion in debt for future generations.

    Currently, Japan's per capita GDP is ~$34,000. Estimates show that every child born in 2016 would be welcomed into this world with a debt burden of $140,000. Ignoring this for political expedience in the present is not "correct" by any measure, economically or morally. Think for yourself and stop listening to Keynesian economists and politicians and their sycophants in the media

  • 0

    globalwatcher

    <>Think for yourself and stop listening to Keynesian economists and politicians and their sycophants in the med

    Keynesian theory works when the Consumption and Investment are fully utilized.

  • 0

    globalwatcher

    And Noda is not doing it the "correct" way unless you believe that adding even more debt to Japanese children is correct.

    Well, please check yesterday's JT post. To my understanding, Noda is planning to use Reserve money. Please let me know.

  • 2

    gogogo

    including healthcare and agriculture, as well as on public works projects following last year’s quake-tsunami disaster.

    Wow... heathcare because of the aging population, public works to give more money to Yakuza construction companies and there is already a quake-tsunami disaster fund.... isn't this doubling up?

    How about actually spending the money on schooling and education plus giving tax breaks to people over companies.

  • -2

    saidani

    Keynesian theory works when the Consumption and Investment are fully utilized.

    So Europe is doing okay? The US is on its way to a full fledged recovery? It's worked in Japan? Show me one instance when this scheme has worked.

    As for consumption, where has the government applying Keynesian policies been able to increase consumption demand? They don't know how to make people spend money in recessionary, high unemployment/underemployment economies.

    As for investments, most seem to go to politically favored special interests including failed banks (the Japanese "zombie" model), unprofitable "green" businesses, and labor unions. It is highly debatable that this is the proper utilization of investments.

    The ultimate award for candor and honesty must go to Jean-Claude Junker (Prime Minister of Luxembourg) who apparently said – "We all know what to do, we just don't know how to get re-elected after we have done it." - http://www.zerohedge.com/news/2012-11-29/cashin-catches-juncker-act-telling-truth-confirming-everything-lie

    Junker explains all you need to know about Keynesian theory in that one statement.

  • -1

    saidani

    Noda is planning to use Reserve money

    LOL...the reserve money should have been spent first. That's why they have reserves. What were they waiting on? Meanwhile, you still have that Y1 quadrillion debt overhang. And what makes you think that this stimulus will work better because it is from a reserve fund instead of borrowing? Waste is waste regardless where the money comes from.

  • -1

    saidani

    Dog Nov. 30, 2012 - 02:05PM JST

    Yes, and Germany is screwing up for the EU bureaucrats who would like nothing better than to go full-blown Keynesian and further tighten its reins on the member states.

    As for Keynesian theory, the idea was to save money during the good times and use it to maintain the total level of spending during downturns. It was a notable theory but government didn't save money during good times so they fell to borrowing and printing money, the former which damages economic growth, the latter which devalues the currency and destroys the lifetime savings of hard working people.

    That sense of well being hasn't worked. Consumers are not spending at levels which will create jobs or incentivize capital investments. Without an increase in consumption, Keynesian theory is a waste. And economists have not figured out how to make people spend money during recessionary times. Japan is the perfect example of the results of this flawed theory, lower incomes, high debt, fewer job opportunities, a broken welfare system, and a bleak future for Japanese youth who will be expected to pay off the debt.

    I believe that you should also do a little more critical thinking before you call someone else clueless. But, you keep supporting these policies at your own peril. No nation has ever borrowed its way out of debt. It either has destroyed its currency or defaulted.

  • -1

    saidani

    Dog Nov. 30, 2012 - 02:32PM JST

    Yes, it is pointless. It is doubtful that we would resolve the same issues that Keynes and Hayek could not. In fact, Keynes was deemed more acceptable because it gave the power of spending to politicians and bureaucrats while Hayek relied on free markets forces. You certainly could not argue for Keynesian theory any better than Keynes so we will end our back and forth.

    That said, you should consider for your own well-being how default or the destruction of the currency (a la, Wiemar, Yugoslavia, Zimbabwe) will affect your life in the sure to be near future.

  • 1

    JapanGal

    @Dog

    Are you kidding about the trains? What time do you go to work?

    agriculture <<<<< They own the lobby here don't they. Inefficient and wasteful.

  • 0

    Nathaw

    Back in 2008. US, Australia and China tried to stimulate economy with huge government spending. US debt has sky rocketed and unemployment is still high. Trouble maker Banking were refrained from sacking. Now that industry is sacking more and more staff. Subsided Solar panel plant was also failure. Australia was relatively debt free at that time. Now their account is getting red and banking sector is struggling with low demand for their products. Manufacturing is finished and retail is bleeding with low consumer sentiment.

    Friendly neighbor China fueled economy with construction boom in 2008. It was a joy for building contractors and real estate agents. That boom were fueled by bad loans and many state authority have no capacity to repay their debt to banks. It is inviting another nightmare of US style banking crisis. Their property sector is struggling with low demand and many completed buildings are empty like Ghost towns. It is another ticking time bomb for sub prime mortgage crisis.

    Stimulation will protects some jobs and consumer confidence. However it can not sustain for long term and stable growth and jobs security. The benefit is less than risk associated with bad loans which will be unlikely recovered. It is another Greece tragedy for Japan.

  • -1

    globalwatcher

    saidaniNov. 30, 2012 - 01:55PM JST

    Noda is planning to use Reserve money

    LOL...the reserve money should have been spent first. That's why they have reserves. What were they waiting on?

    Agree, I do not live there and I have no idea. Japan used the money for wrong places such as bridges, airport and road.

    What Japan needs to do the most for the next 2 decades is a structural change in economy trying to maximize the potential in domestic consumption and investment to increase efficiency in GDP and speding cut. As far as Monetarists theory under Greenspan failed and he has already admitted that in public. The propencity of money supply was too fast without regulation that lead US financial market to go bust.

  • 2

    Open Minded

    I am not an economist, but good sense would support stimulus to overcome a short term period of turbulences from uncontrollable environment to maintain country cohesion and economy. But never to cover a structural weakness. This is just postponing a final crash.

    All this money should go in long term investment, and I am thinking especially in education, modernizing the governmental system and to high added value R&D. Of course this is not particularly sexy 2 weeks before elections.

    I am not optimistic about Japan's future.

  • 0

    Korlacan Khanthavilay

    I find these stimulus packages to be useless. Give broke people money, they'll try to save it. Not go hog wild and buy everything under the sun.

    I would, but that's me. I just live day by day and ignore consequences. Although, I do have three different retirement plans. That goes into the "I can't spend this money, cause it goes into these plans before I even get my hands on them" funds. I'm stupid with money, so I have to keep it out of my hands.

  • -1

    saidani

    globalwatcher Nov. 30, 2012 - 10:26PM JST

    Ah...monetarist theory vs Keynesian theory. These are false choices. What about the Austrian school which favors free markets over government-controlled economies? After all, it is the government's meddling that caused the problems in the first place. Of course, it's difficult to embrace socialism if the government cannot control the economy, what with redistribution and the corrupt centralization of power.

  • -2

    ubikwit

    saidani

    Ah...monetarist theory vs Keynesian theory. These are false choices. What about the Austrian school which favors free markets over government-controlled economies? After all, it is the government's meddling that caused the problems in the first place. Of course, it's difficult to embrace socialism if the government cannot control the economy, what with redistribution and the corrupt centralization of power.

    You overlook the crucial point that the "corrupt centralization of power" in the modern era is closely linked to the corrupt centralization of wealth. That is why we have anti-trust laws, and why the regulations on the finance sector implemented after the depression were of utmost importance to keeping the "free market" free.

    Theodore Roosevelt was the president to act against the "Trusts", which comprised Standard Oil et. al, who were trying to sell the argument that their economies of scale benefited the country as a whole, so they should be able to hold defacto monopolies as an exception.

    Without a government to mediate between various competing private interests, you would wind up with monopolies and syndicates (like OPEC, for example, which is an anomaly), not a free-market economy.

    The government does not "control" the economy, just regulates it, and in times of irregular dysfunction, such as the present, the government can step in to divert tax revenue to publicly beneficial projects in order to prime the economy.

    You are basically spouting neo-liberal dogma, that which is generally disseminated by those associated with what Theodore Roosevelt called "the wealthy criminal class".

  • 0

    Vermillion Brent

    Do they not see how badly the stimulus efforts went for the United States of America and even Japan's public works efforts of the 1990s were a failure. History shows us that stimulus projects do not work, are a waste of money and only serve to increase a countries deficits to terrible levels. Does Japan need to rebuild some infrastructure after the devastating disasters, yes, but with care and attention. Each project should be planned and funded individually, not by a blind stimulus fund to cover all projects like the 1990s. A large stimulus fund leads to impulsive projects for the purpose of showing activity and spending of the money. These projects usually lack focus and have poor oversight, just look at The Hamada Marine Bridge.

  • -4

    nigelboy

    No, I should have made it very clear that I do not go along with Abe. I go along with Noda.

    So you're against increase spending on public works. Please make up your mind.

    In macroeconomics point of view, I strongly believe the Central Bank should be left alone, independen, for monetary policy.

    When you have a appointed president (BOJ) who job is safe for five years who has yet to succeed in getting out of the deflation while at the same time telling the public that he fears "inflation" does not need to be there. PERIOD. If you want structual reforms on economy, start with removal of "independence" of BOJ and make them accountable much like the lawmakers.

  • 0

    globalwatcher

    nigelboyDec. 01, 2012 - 04:53AM JST

    No, I should have made it very clear that I do not go along with Abe. I go along with Noda.

    So you're against increase spending on public works. Please make up your mind.

    Like I said, I do not have to make up my mind. In macroeconomics point of view, the macroeconomics determine the value of currency, PERIOD. We want Japan to test water first to see if it works. LOL.

  • 0

    saidani

    >The government does not "control" the economy,

    The US government debt exceeds its annual GDP. Japan's is more than double. The equity markets no longer reflect fair value of companies, but only the interference of the government/central banks. So, while Americans and Japanese can take false comfort that government does not own the means of production, the politicization of the economy has basically the same effect.

    You tag me as a neo-liberal without recognizing the effects of corporate lobbying on the current corrupt government. In the US, Obama is in bed with the very people you claim I defend. I don't. In fact, I advocate for the end of all corporate welfare and lobbying which makes it too easy for corporations to purchase politicians and thereby game the system against the working class.

    For you and @nigelboy and @globalwatcher, please answer one question; what is the end game? How is this policy of government interference in the economy going to work out for everyone (except higher taxes, lower incomes, fewer opportunities and greater dependence on the government)? Tim Geithner was asked the same question and admitted that the Obama administration didn't have that answer. They are simply spreading borrowed money around hoping it gets better. Japan has done the same thing for 2 decades without success. If you guys can't answer the question better than Obama and Geithner, then you should probably rethink your opinion on this wasteful crap.

  • -2

    nigelboy

    Saidani

    Can't speak for U.S. but for Japan, the amount of debt is over exaggerated IMO. For instance, you state "Estimates show that every child born in 2016 would be welcomed into this world with a debt burden of $140,000."

    You and I both agree that most all of the Japanese debt are held by Japanese themselves. Hence, I really don't agree with the "debt" of the government also being the debt to the nationals per capita for the simple reason that debt to one party is an asset to another and in this case, Japanese themselves. As I have stated numerously on similar subject, this is why I stated that Japanese debt, in essence, is a net sum zero game on Japan's balance sheet.

    As in case of higher taxes (consumption taxes in Japan), I'm somewhat mixed in that I'm for the policy of matching the funding of social security and welfare expenses to consumption taxes directly as opposed putting all the tax revenues together in a big pie and disbursing them with other government expenditures but I would prefer that they do this when certain level of inflationary trend had been established in Japan's economy. In any case, this was done more to ease the population's psyche especially the elderly whereby if they purchase, they know that their money will be coming in.

    And as for the stimulation of the economy, direct payment (child allowance) didn't have meaningful effect simply because the parents just kept them without spending them. Eco Point, on the other hand, had acording to METI, had 5 trillion yen effect on the economy which indicated a good mulitiplier effect

    http://www.j-cast.com/2011/06/15098528.html

    What Japan is experiencing again, is a deflation which is the primary cause of low wages. In other words, the supply exceeds the demand. So in order to combat that, supply needs to be decreased while the demand has to be increased. To increase demand, you need more public spending and reduced tax on investments. To decrease supply, you need protection of industries/markets and shorter work hours.

    Personally, I think too much emphasis is placed on reducing the Debt/GDP by reducing the Debt figure while almost completely ignoring increasing the GDP when in fact such increase correlates to increase in tax revenues. Hence, I'm for more increased spending on public works which has been stagnant for a decade now.

  • -2

    saidani

    Hence, I really don't agree with the "debt" of the government also being the debt to the nationals per capita for the simple reason that debt to one party is an asset to another and in this case, Japanese themselves. As I have stated numerously on similar subject, this is why I stated that Japanese debt, in essence, is a net sum zero game on Japan's balance sheet.

    It is not a zero sum game if the debt is paid off by future generations via higher taxes which represents opportunity losses for them or if the debt is either devalued through monetization or defaulted, in which case of the latter two, the debt holders absorb the losses. In all cases, the economy suffers. That is the nature of debt overhang on the economy.

    Eco Point, on the other hand, had acording to METI, had 5 trillion yen effect on the economy which indicated a good mulitiplier effect

    Yes, but these types of stimulus merely steals purchases from the future. The proof of that is the collapse of the auto market and flat panel TV's after the subsidies ended.

    To increase demand, you need more public spending and reduced tax on investments. To decrease supply, you need protection of industries/markets and shorter work hours.

    Increased public spending (infrastructure, education, and welfare, etc.) has been the policy in Japan for two decades. We're still looking for the light at the end of the tunnel. In fact, industry is reducing the hours of workers but that only means fewer full time jobs and has no effect on supporting income which are declining. Nearly 50% of Japan's workforce is either unemployed or working less than full time hours. The protection of the domestic markets has resulted in a lack of competition and entrepreneurship. Additionally, it creates strong political special interests (JA, Keidanren, public service unions, etc) which tend to resist real reforms.

    Personally, I think too much emphasis is placed on reducing the Debt/GDP by reducing the Debt figure while almost completely ignoring increasing the GDP when in fact such increase correlates to increase in tax revenues. Hence, I'm for more increased spending on public works which has been stagnant for a decade now.

    You would be a hero for all Keynesians if you could figure out how to create consumer demand and grow the economy when so much money is been extracted from the economy by the government. Remember, the government has no money except that which it takes from current or future economic activity. It doesn't work as a long-term structural remedy. Japan doesn't need more roads and bridges, it needs economic vitality, innovation, and greater competition in the domestic economy. The government's hand in the economy is too large to allow this.

  • 0

    globalwatcher

    Tim Geithner was asked the same question and admitted that the Obama administration didn't have that answer.

    Well, first of all, I am for the Demand Side Economy. The jobs should be created from the middle income class not from the top to bottom. I also believe in mechanism (invisible hands) in capitalism based on Consumption and Investment that equals to the growth. The communism is not based on Consumption and Investment becsause Government controls everything.

    Tim Geithner and I share the same view- increasing domestic consumption to jump start the economy. Increasing domestic consumption (quality hospitals, housing, more consumer goods and services) will improve quality of life for common Japanese people. Japanese old economy model for the past 5 decades was driven by exporting and it has been supported at expense of the middle income class of Japan. Speaking on Invrestment, Japan needs to spend more on quality of education, R&D, New Energy alternatives to maximize efficiency on long term GDP growth while balancing the revenue and expenditures.

    Keidanren chief is saying Abe's position is very reckless like I have been advocating here on JT. He also acknowledged that the structural reform is needed in Japan. I believe he understands the mechanism of capitalism; Consumption and Investment that equals to the long term growth.

  • -2

    saidani

    I also believe in mechanism (invisible hands) in capitalism based on Consumption and Investment that equals to the growth.

    But consumer demand is not growing nor is capital investment despite trillions in stimulus and subsidies both injapan and the US? You are advocating for something that the government cannot deliver. Once again, the Keynesian macro-economists admittedly do not know how to create consumer demand in recessionary times. That is because the micro-economy (families, consumers) look to protect themselves by spending less and saving more. As @nigelboy points out, Japanese parents save their child allowances much like the banks save (invest) the free money they get from the BOJ. This money never makes its way into the economy and, thus, is wasted for the intended purposes.

    Companies are not different. They are under no obligation (nor would you want them to be obligated) to make unnecessary capital investments or even hire or retain unneeded workers.

    Government intervention, especially by going into massive debt or raising taxes, hurts real economic activity.

    As for Yonekura and the Keidanren, this is merely a very politically powerful special interest who seeks its own benefit at the expense of taxpayers. He is talking his book. Any reform he seeks will be designed to benefit the Keidanren members, not necessarily the nation or the economy. Why would you trust someone who actively seeks taxpayer subsidies to help Japanese companies off-shore jobs?

    As for Abe, he is no better or worse than Noda. Stop looking to politicians whose biggest claim of success is to win a popularity contest for answers.

  • 1

    sfjp330

    Problem is that older people in Japan is still holding onto over $340 billion in cash. No matter what the J-goverment do to create consumer demand, they will not spend, and they don't care. And, if everybody in Japan want to keep the current pension and welfare benefit systems, the burden on the current working generation will become that much heavier.

  • 2

    timtak

    I only hope that they do not spend the money to increase the size of the public sector. I work in the public sector. I think that it, I, need to be cut, or hopefully privatised. The work ethic is scary. People seem to feel that as long as they are fulfilling a job description, they are doing their job, irrespective of the result of their work. E.g... if one is a government English teacher, then if one goes to work, gives lectures, files the paperwork, etc, then one is doing ones job even if ones students do not learn to speak English. Whether or not that objective is achieved does not seem to be relevant. If one is a swimming pool operator, then if one opens the doors and closes them at the right time, then one is doing ones job, even if the place is unused, or too cold for anyone to use, because there are three public employees employed to open and close each door. The final output does not seem to matter as long as one is fulfilling ones role within the system. I have seen inside some famous Japanese companies and in some of them, the same "kanri" rent-taking, job-definition, rights-based work ethic prevails. What happened to the customer? To the final product? The final product appears to be the public employment system itself. Come on public sector Japan, take a look at yourself!

  • -2

    nigelboy

    It is not a zero sum game if the debt is paid off by future generations via higher taxes which represents opportunity losses for them or if the debt is either devalued through monetization or defaulted, in which case of the latter two, the debt holders absorb the losses. In all cases, the economy suffers. That is the nature of debt overhang on the economy.

    Why do you assume it's the higher taxes which will pay off the debt as opposed to increased tax revenues as a result of the stimulus and inflation? In the current deflation cycle, it's not like the Japanese entities are forced to buy JGB but more to do with the fact that thousand of trillion yen are just sitting idle and is not circulating. The cycle can be summed as Excess cash--->JGB----->pension to elders----->Banks/Financial institutions---->Excess cash----->JGB.

    Yes, but these types of stimulus merely steals purchases from the future. The proof of that is the collapse of the auto market and flat panel TV's after the subsidies ended.

    The prior Eco subsidies for automobiles ran from 2009~2010 which yielded an increased purchase of 25% http://www.jada.or.jp/contents/data/type/hanbai/201009.php

    The current one which started on Decmber of 2011 and expires Jan of 2013, as of November of 2011, yielded an increased purchase of 28.7%

    http://www.jada.or.jp/contents/data/type/hanbai/201211.php

    Hence, it's clear the the initial plan did not "steal" purchases from the future.

    Increased public spending (infrastructure, education, and welfare, etc.) has been the policy in Japan for two decades. We're still looking for the light at the end of the tunnel. In fact, industry is reducing the hours of workers but that only means fewer full time jobs and has no effect on supporting income which are declining. Nearly 50% of Japan's workforce is either unemployed or working less than full time hours. The protection of the domestic markets has resulted in a lack of competition and entrepreneurship. Additionally, it creates strong political special interests (JA, Keidanren, public service unions, etc) which tend to resist real reforms.

    The spending on infrastrure, in particular, has been stagnant for a decade now.

    http://www.mof.go.jp/jgbs/reference/appendix/zandaka01.pdf

    The increase in welfare, of course, is as a result of change in population (age) but the declining income, as you say, is as a result of the deflationary spiral I mentioned above. The removal of protection of the domestic market simply means that you are contritubing to this malaise through "cheap" products and services.

    You would be a hero for all Keynesians if you could figure out how to create consumer demand and grow the economy when so much money is been extracted from the economy by the government. Remember, the government has no money except that which it takes from current or future economic activity. It doesn't work as a long-term structural remedy. Japan doesn't need more roads and bridges, it needs economic vitality, innovation, and greater competition in the domestic economy. The government's hand in the economy is too large to allow this.

    As the recent tunnel collapse has shown, Japan's infrastrucutre which were built during her growth period, needs to be updated and improved and new roads and bridges should be built to encourage more domestic commerce. This multiplier effect is indeed what's needed to get out this deflationary spiral.

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