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U.S. urges Japan to stick with 'three arrows' economic plan

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"....but gloomy economic data suggest it is not succeeding as hoped."

Yes, for one simple reason: the consumption tax hike. Stimulus simply wont work on the back of a sweeping tax hike. Don't these "experts" get this?!?!

7 ( +8 / -1 )

His three arrows are limp as far as consumers are concerned. We are hurting in the pocketbook.

7 ( +7 / -0 )

Increase domestic consumptions? When prices and tax go up and salaries remain the same. How?

9 ( +9 / -0 )

Japan’s economic policy to sustain a healthy rate of domestic demand growth

There's nothing in Abe's economic plan that even sustains Japan's current, anemic demand growth. PM Abe reduced business taxes by only a piddling 5%, which, at 35%, are still too high. Canada offers a combined rate of 25%-one of the most competitive rates in the world.

Taxation on consumers remains high. Ward taxes, national health insurance premiums, taxes on both land and buildings, etc, work only to reduce discretionary income, and subsequently demand suffers.

To boost demand consumers, across the board, need more disposable income. That means cutting taxes, not hiking them. Quantitative easing, stimulus plans, and public spending won't deliver more money into working people's bank accounts, nor bring about wage increases.

If PM Abe is smart, he'll abandon the "Three Arrows" and get back to basics. Cut taxes, reduce spending, and create an open, free market for investors.

8 ( +8 / -0 )

If the US is pushing this for Japan, there must be something nefarious about it. Doing the exact opposite must be better.

5 ( +6 / -1 )

The American support for Abe's policies is more cynical than this spokesman would have it. The U.S. corporate establishment is enjoying the weak yen, plain and simple.

Monetary easing (to giant corporations) and tax hikes (for the masses) is also a colossally stupid way to stimulate an economy.

2 ( +2 / -0 )

U.S. Treasury Secretary Jack Lew appears to be just another "instant expert" who is on the outside looking in. These idiots bug me to no end. If he were here actually living in this economy he surely would have different thoughts on those three arrows.

As the above article above states: "gloomy economic data suggest it (Abenomics) is not succeeding as hoped."

If Jack Lew were to turn around, bend over and give us a good target to shoot at, hopefully those three arrows would find a good landing place.

6 ( +6 / -0 )

If PM Abe is smart, he'll abandon the "Three Arrows" and get back to basics. Cut taxes, reduce spending, and create an open, free market for investors.

Um, do you realize that the biggest glut in Japan's budget is actually social insurance instead of so called pork barreled projects? No susbtantial reduction in government spending can occur without cutting granny's pensions. Do you think any democratically-elected can cut Granny's pensions without a huge amount of gaiatsu (such as the IMF)?

-8 ( +0 / -8 )

I think he needs a fourth arrow in his plan.

4 ( +4 / -0 )

The US is giving economic advice? The US economy is currently being manipulated by a huge ponzi scheme to keep it afloat and give the appearance of stability and Jack Lew is giving advice to Japan. It just does not pass the giggle test.

2 ( +3 / -1 )

This article, like many others of the same feather, need their own category: Economic Stupidity. It's a Keynesian Calamity.

Jack Lew is the current clown running the Ponzi Scheme called US Treasury. Hey Jack, why is the chest empty?

0 ( +2 / -2 )

Um, do you realize that the biggest glut in Japan's budget is actually social insurance instead of so called pork barreled projects? No susbtantial reduction in government spending can occur without cutting granny's pensions. Do you think any democratically-elected can cut Granny's pensions without a huge amount of gaiatsu (such as the IMF)?

Um....being condescending isn't the same as being intelligent.

The pay outs to retirees are peanuts considering how much they have paid in over their working lives. Also, granny's pension won't be worth a whole lot if PM Abe's nonsensical policies continue. The buying power of the yen internationally, and internally being driven down by QE, and taxation.

Pork barrel projects that cost trillions of yen would be better put toward paying those pensions, and reducing the debt. "Granny's pensions" won't be able to pay for a lot if they're taxed on their income, and on everything from stamps to medicine.

Reducing taxes on land, property, and income would allow retirees to live more comfortably. Plus, those supporting aged relatives could use the break.

The economy should come first. Fixing the economy makes all other problems easier to tackle. The problem here is PM Abe is more concerned with impressing the IMF than with actually doing something real to bring the economy back to a healthy, growing state.

3 ( +3 / -0 )

It is not really my intention to be condescending:

Pork barrel projects that cost trillions of yen would be better put toward paying those pensions

While I don't disagree that pork barrel projects should be stopped, the numbers are nevertheless that the glut marked "social security" in Japan's budget is typically something like 5-6 times larger than the glut marked "public works". Which is to say even if you completely shut down the public works program (assuming it is all pork) and keep the social security budget as is, you are still running a massive deficit and the debt's growth will only be slightly slowed.

Fixing the economy makes all other problems easier to tackle.

Oh, Abe's in a spot about this. Do remember that Japan's debt is already over 200% of GNP and the only rational reason Japan hadn't gone bust already is that the debt still hasn't quite equaled the total number of Japanese assets and most of the bonds are being held by Japanese.

Nevertheless, things are tense enough that Abe or any other Japanese PM can no longer take a "pure" policy of boosting growth. The IMF and other outsiders are no longer willing to wait for the long-term results of an "at all costs" economy boosting program. They want Japan to make motions towards being "fiscally responsible". Which means cutting expenses or boosting taxes (even if it hurts the economy boosting program.

Of course we start by cutting expenses but politically it is almost impossible to cut social insurance (and you say I shouldn't anyway). The public works budget might indeed be cuttable (but even there, you may consider Abe does need to maintain relations with industry - without industry's cooperation, no economic revival plan can succeed) but its value is limited. Japan's defense budget is too small and only a drop in the bucket anyway. And Japan's budgets for things like education, for a First World Nation, may be adequate not exactly luxurious (statistics like the teacher:student ratio would suggest this). Overall, Japan's taking less money from its citizens than many other First World Nations.

So, where's the life-saving spending cut? What else is there but raising taxes?

0 ( +0 / -0 )

@Kazuaki Shimazaki ... The IMF and other outsiders are no longer willing to wait ... What else is there but raising taxes?

As for the outsiders, of course it is wise to politely listen to advice, but not wise to imagine that outsiders advice is necessarily given with Japan's long term stability and prosperity as first consideration. Sometimes interests may coincide, sometimes not.

Besides raising taxes there is also increasing the money supply. As a sovereign country with its own money supply, Japan can do this. One result will of course be inflation - but Abe already said he want 4% inflation per year. Effectively this is a tax on un-invested savings, so we could expect a lot more economic activity as dormant savings are invested. Meanwhile, the newly printed money could be used for necessities which are too general to be answered by the free market - in particular easing the burden of the costs of raising children - as well as for seeding new industries - for example to speed up work on the Fuji Molten Salt Thorium reactor, as well as other alternative energy sources and energy saving housing etc.

Of course since printing money devalues money, it could be said to be a kind of tax, but it is a tax on leaving money inactive, not a tax on spending money.

Now a minor matter but, it is not only public works (6.2% of budget) but also local allocation tax grants (16.8% of budget) - where you will find the sources of funding for the zero ROI projects. You could be right that it is a "minor" matter financially - but it also reflects inflexible thinking which is more serious problem.

0 ( +0 / -0 )

So, where's the life-saving spending cut?

Spending cuts would have to happen across the board. I never said there was one spending cut (nor did I mention defense spending).

You raise a good point. A thorough audit of government spending (at all levels) would really shed light on what could be cut.

The government takes in far more money than it actually pays out in the form of pension benefits, for example. What a retiree receives from the government in retirement benefits is peanuts, if you consider how much is paid in over an average working life.

What else is there but raising taxes?

Short term

The government would've got better results from the sales tax hike if it had significantly cut taxes on business, and wages. That's just to start.

Reducing taxes on income, means people have more disposable income to drive up demand, and thereby bring about inflation. Rising taxes on goods and services hurts families and individuals trying to get by on stagnant wages.

Tax rises haven't done away with sovereign debt. Debt is brought under control by maintaining a healthy economy, and bringing spending down.

PM Abe's plan to borrow money, spend money, and further tax a population that is already heavily taxed is unsound, and ineffective.

Long term

Foster, and grow Japan's entrepreneurial class, which way too small considering the population. Small business can drive down unemployment, and bring in more revenue.

Open Japan's market to foreign investment. Allow multi-nationals to enter Japan more cheaply, and easily. Free trade, and investment creates jobs, not to mention other economic/investment opportunities, which in turn creates profits and wages that can be reasonably taxed.

Tax hikes are old-hat, and, in many countries, tax-fatigue set in ages ago. Taxes rises would've worked thirty years ago, but now, which an anemic economy, higher taxes will do more harm than good.

As you stated, the debt is 200% of the economy. So, why not make growing the economy the priority? If the economy continues to contract, how will the debt be brought under control?

0 ( +0 / -0 )

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