S&P says Japan needs to raise revenue with sales tax hike

what else would you expect from con men?

These people always say that Japan's GDP to debt ratio is 200%, the highest in the world. They always forget that if you net off Japanese government assets, it is more like 100%, not good, bur like the US. Assets include 50% stock ownership in all the companies that have been privatized (especially encouraged by Koizumi): the Japan Railways (used to be Japan National Railways 国鉄, right?), Japan salt and tabacco, and soon the postal deposit system, and dozens of others. Also, Japan is the world's largest creditor (the US is the world's largest debtor, but nobody complains about that).

The arcane 'science' of credit ratings and risk of default: predictions from one of the big three Teflon-coated agencies who managed to avoid any blame for the mortgage meltdown.

Hope attention isn't being taken away from helping add to Japan's Social Security funds with money from the consumption tax increase. Jiminto has already pushed this item to the very back of its financial plans ... and such stuff as said by Standard & Poor’s above might cause Jiminto to once again ignore the nation's Social Security problems ...

Consumption tax hike, eh? Japan has tried that in the past. Guess what -- they didn't work. In fact, they caused a couple of recessions.

It would be nice if the Einsteins at SP and elsewhere would tell us WHY the deficit needs to come down....and why it's worth crashing the economy to do it.

S&P has some curious logic there - exempting food from the tax is supposed to help acceptance as people realise they will need to pay higher taxes elsewhere as a result?

Educated people know that it is economically more efficient to keep taxes simple, without a myriad of exemptions, if the purpose is to gather revenue, which in this case it obviously is. Giving rich people a tax break on their consumption doesn't help to raise revenues.

How about selling a bit of this Yankee surplus? Govtbonds?

Japanese are mathematical and computer geniuses, so I do not think it would be a problem to insert into a computer or simple cash register, which are electronic, a zero tax for main food staples.

THere should be no cards with my number inserted to fill out forms and request the money back at a later time. It should be done immediately at the register. No tax period on real unprocessed foods.

How about cutting a few bonuses and halving a few salaries of the do-less civil service?

That ought to save quite a bit of money.

That ought to save quite a bit of money.

You really are lost arent you? Government employees pay has been stagnant and bonuses were cut a ton already but that isnt the problem at all, the problem is with the unnecessary public works projects that funnel money to large corporations which are being kept afloat with public funds,

But they haven't cut any heads ensured by law. If you look at the government fiscal budget about 40% is labor related costs. Many of them overlapping with local government regulations. There is also the never ending expansion of Tokubetsu houjin and various other SOE that are a hotbed of Amakudari.Japan's budget would become more healthier. It' only after we had gotten rid of those massive overheads only then we should decide whether we actually need another tax hike or not.

As long as central bankers are in charge of countries' coffers, there will be no way out of their conundrum. Governments will have to continue borrowing money, (that is, paper created from thin air), from the bankers at interest. To pay that interest, they have to keep taxing everything they find in their sights. In the 1800s, it was unconstitutional to collect federal taxes. After all, that was one of the reasons for the American revolution. But when in 1913 the bankers caught Congress in a vulnerable situation, (only 3 congressmen in session with power to approve laws), they finally forced themselves into the US by bribing those 3 congressmen to pass the into law the creation of the Federal Reserve Bank. What came next was the imposition of Federal taxes. And after that, came World War I, a master piece of the bankers, because Congress now had to borrow massive amounts of money from the FRB to finance the war. If you do not believe me, find out for yourself from an independent source, Bill Still, the Money Masters. https://www.youtube.com/watch?v=51CvlMEtf1A It is long but it is very educational. You will not hear this in the news, at school, or in textbooks.

what else would you expect from con men?

Wow, only took one post for the brilliant economists here to attack the messenger, rather than actually take issue with the real message here:

S&P last month cut its rating on Japan from AA- to A+, which is four notches below its top rating of AAA, because it doubts the government’s will reverse economic deterioration. The agency raised its outlook to stable from negative.

The stable outlook means Japan’s rating is unlikely to change for the next one to two years, but S&P will review it annually, Tan said

Argue all you want about arcane points like who holds the Japanese debt, or how much foreign reserve the country holds. The bottom line is still the same, Japan's economy is stuck in neutral, and occasionally slipping into reverse, like it has been for well over two decades. And, two years from now, you folks will still be critisizing the folks like S&P for pointing that out, because you know it is true, and that there is not a thing you can do about it, and not a thing the Japanese government, or people, have the will to do anything about it either. Except pump more money that they don't have into a hopelessly broken economic/demographic model, which will just hurt your buying power for things like imported food, even more. So you have to pray that the government does not listen to S&P and raise taxes, because that would pinch your strained financial resources even more. But take satisfaction in throwing those tomatoes.

"Abe wants to exclude some food from this tax hike"

Please exclude zucchini, that delicious veg is too damn expensive.

<>S&P last month cut its rating on Japan from AA- to A+S&P last month cut its rating on Japan from AA- to A+

Ouch..here we go again. This is a quite challenge for Japan.

I am worrying about a financial meltdown when nobody wants to buy Japan Treasury Bond. So far, Bank of Japan is doing all bond buying (printing) from Japanese banks, but the sky has a limit, and then what?

Maybe they should rescind the tax cut on big businesses and return the sales tax to 5 percent. Or was this a plan to enrich the big businesses all along?

No talk of actually cutting wasteful spending?

I appreciate finance minster Tarō Asō is a loyal and trusted ally of Abe san LDP government, but beyond ten, and the shoes and socks are off.

There is a single lack of economic policy analysis to counter balance the capture all nature to the blunt instrumental effect of another hike in consumer tax. This tax rise will need to be accompanied with structural reforms. Again not to sound like a 'stuck' record, all down to that missing third arrow.

Who could possibly care what S&P has to say? S&P is utterly insignificant.

Proxy thumbs TIMES A MILLION!

http://thediplomat.com/2014/08/sovereign-debt-eroding-japans-national-security/>

FizzBitOct. 24, 2015 - 04:01PM JST

what else would you expect from con men?

Why are you still in denial. I encourage you to read the fact listed above.

4 Good Bad

gokai_wo_manekuOct. 24, 2015 - 04:12PM JST

These people always say that Japan's GDP to debt ratio is 200%, the highest in the world. They always forget that if you net off Japanese government assets, it is more like 100%, not good, bur like the US. Assets include 50% stock ownership in all the companies that have been privatized (especially encouraged by Koizumi): the Japan Railways (used to be Japan National Railways 国鉄, right?), Japan salt and tabacco, and soon the postal deposit system, and dozens of others. Also, Japan is the world's largest creditor (the US is the world's largest debtor, but nobody complains about that).

Have heard this argument like this over and over, but realistically these assets are hard to sell during a financial meltdown.

wanderlustOct. 24, 2015 - 04:26PM JST

The arcane 'science' of credit ratings and risk of default: predictions from one of the big three Teflon-coated agencies who managed to avoid any blame for the mortgage meltdown.

Please review the facts listed above. Japan cannot shift blame to these credit rating agencies. It is getting very serious. Please wake up!!

Abe’s government aims to return to a primary budget surplus in fiscal 2020 and then lower the debt-GDP ratio, the world’s worst, at around twice the size of Japan’s 550 trillion yen economy.

This is the most stupid joke I have ever heard. Not obtainable at all even with 3.5% GDP.

My above post did not explain how Treasury Department of Japan is issuing bonds and how BOJ is buying them back from banks.

BOJ is prohibited to do direct purchasing from Treasury department of Japan, but once these bonds are sold to banks, BOJ can purchase them back (printing money) from banks. Once US bond is offering higher interests, then these banks will shift money to US. If you do not understand, please ask. I am willing to explain this to you.

The Japanese government is not spending tax money to reduce the national debt. Instead, the government lied to the public and is spending more than ever before. Bottom Line: Tax increases always lead to increased government spending, not debt reduction. That's why the public should always fight for cuts in government spending first instead of accepting tax increases. The government always lies.

The government always lies.

Oh the irony, a person with a handle with the word "bengoshi" which in English for those who dont know, means "lawyer"....stating the government always lies.

Coming from a "lawyer"........wow, who to trust.

So S&P says Jump to a bride We have to do it?

BOJ is prohibited to do direct purchasing from Treasury department of Japan, but once these bonds are sold to banks, BOJ can purchase them back (printing money) from banks. Once US bond is offering higher interests, then these banks will shift money to US. If you do not understand, please ask. I am willing to explain this to you.

Oh please, do explain. And while you're at it perhaps you can explain where the banks get the Japanese yen from to buy the bonds in the first place, and exactly how they are going to buy US treasury bonds with Japanese yen.

The bottom line is still the same, Japan's economy is stuck in neutral, and occasionally slipping into reverse, like it has been for well over two decades. And, two years from now, you folks will still be critisizing the folks like S&P for pointing that out, because you know it is true, and that there is not a thing you can do about it, and not a thing the Japanese government, or people, have the will to do anything about it either.

What a surprise, a straw man argument on the internet. Nobody is criticizing S&P for "pointing out" that Japan's economy is "stuck in neutral" (a situation that has now been duplicated in all other countries, a fact that seems to consistently go over the heads of the Japan Doomer crowd), they are criticizing them because their constant fear mongering statements and their recommendations of supposed "solutions" are, in a word, moronic. It really takes a lot of ability to fit so many economic myths, fallacies, and plain factual errors into such a short article, but Mr. Tan and Mr. White somehow manage it. For starters even the headline is nonsensical. Sales tax hikes do not raise revenue, they just speed up the collection of revenue that would be collected anyways. They also don't result in a reduced Debt / GDP ratio, they increase it and lead to recessions, as has happened every previous time the tax has been raised. And the article goes downhill from there. Whether Mr. Tan makes his ridiculous statements because he is an unqualified empty suit (hardly unusual in the financial industry) or because he is cynically making statements he knows are untrue in order to push the political agenda of the ratings agencies operators, well you'll have to ask him.

Japan is the world's largest creditor (the US is the world's largest debtor, but nobody complains about that).

Japan's total credit holdings are a rather small fraction of it's debt, and come nowhere near to balancing it out. Secondly, America is by far the world's richest economy. America has vast land, material, and energy resources, and it's current debt is considered to be only a few percent of the country's net worth. Japan is the world's most indebted developed country, not America.

Next, Japan's debt is not 200% of it's GPD, it is more than 250% of GDP. Despite interest rates of near zero, Japan's debt servicing costs are roughly double America's.

Trying to subtract the value of Japanese government assets like JT, JR, and JP is tricky. JT is losing money hand-over-fist, JR is plugging along, the value of JP's assets are greatly weighed down by the amount of JGB's they are holding. The market value of these "assets" is far less than they are assessed. On the other hand, if the American government sold it's property assets (which are the most valuable in the world), they would easily erase all of America's debt. You can't forget that most of the land which contains oil, ore, and minerals is federal land.

It amazes me that so many people in Japan refuse to see the handwriting on the wall. The economy peaked out a long time ago in the late 1980's, and the stock market has never again reached their previous highs. The population is decreasing, and will keep decreasing for a long time making economic growth even more difficult, and there is nothing in sight to bring Japan back to the good old glory days. Attacking the S&P messenger will do absolutely nothing to help Japan's future.

Guy_Jean_DailleultOct. 25, 2015 - 09:50AM JST

BOJ is prohibited to do direct purchasing from Treasury department of Japan, but once these bonds are sold to banks, BOJ can purchase them back (printing money) from banks. Once US bond is offering higher interests, then these banks will shift money to US. If you do not understand, please ask. I am willing to explain this to you.

Oh please, do explain. And while you're at it perhaps you can explain where the banks get the Japanese yen from to buy the bonds in the first place, and exactly how they are going to buy US treasury bonds with Japanese yen.

I think you are not getting my point. Banks will be shifting money to get the max returns for customers elsewhere while BOJ cannot increase interest rate, period. You know why BOJ cannot increase interest rate. I hope so.

I was actually referring to the J government, not the S-n-P crooks. How do they plan on increasing the population by making things more expensive? Maybe Abe should make the upper classes have 6 children.

It amazes me that so many people in Japan refuse to see the handwriting on the wall. The economy peaked out a long time ago in the late 1980's, and the stock market has never again reached their previous highs. The population is decreasing, and will keep decreasing for a long time making economic growth even more difficult, and there is nothing in sight to bring Japan back to the good old glory days. Attacking the S&P messenger will do absolutely nothing to help Japan's future.

Three cheers, now Yogi has joined the likes of Sangetsu, myself, and others who see the foolishness of continuing to simply attack the messenger. In psychological terms, folks like Guy and Jeff are called "enablers". Rather than saying what needs to be said, they find it easier to just spout off nonsense about how S&P is so stupid/irrelevant, and that Japan can just keep borrowing and borrowing -- Kinda like offering more drugs to an addict, rather than forcing them to clean up their addiction. Conveniently ignoring tha fact that, as you point out, all this spending has not changed the economic fundamentals of Japan one tiny bit. Wonder what they'll have to say in the next few weeks when the next disappointing news about the Japanese economy comes out?

Japan's total credit holdings are a rather small fraction of it's debt, and come nowhere near to balancing it out. Secondly, America is by far the world's richest economy. America has vast land, material, and energy resources, and it's current debt is considered to be only a few percent of the country's net worth. Japan is the world's most indebted developed country, not America.

Thanks for speaking up.

Yep, it has been very sickening to hear arrogant Japanese comparing US to Japan. Remember, US has a balancing budget provision of law while Japan has NONE. Second, US will be the largest energy holding country in the world by 2020 exceeding Saudi Arabia.

This is the same ratings agency that rated mortgage backed securities, prior to the 2008 financial real estate collapse as AAA, even though the banks weren't checking income, credit scores, and down payments on real estate were less than 5%. This is the same rating agency that downgraded US Treasuries, but quickly reversed it's downgrade after the US Government threatened to pull their credentials for rating, and sending a team of IRS auditors to send them some serious pain. Do what is right for the people. Don't raise taxes, cut the government.

Raising the tax would only hurt the economy, and deliver a meager bump in revenue. Higher VATs don't encourage more consumer spending, especially if taxes on income, property, profits, etc, stay the same, or go up. If a jacked up sales tax is to work, other taxes must come down, especially on stagnant Japanese salaries.

S&P seems to be assuming that the Japanese government doesn't collect enough tax. Japan's debt is the direct result of uncontrolled deficit spending, not a lack of taxation. The focus should be on fixing the economy, not slowing it down with higher tax burdens.

Higher taxes have never brought about prosperity, nor led to lower sovereign debts.

Spending cuts and getting rid of waste would go much further, and more quickly than just imposing higher taxes on a workforce that pays a lot of tax already. The cost of living in Japan is also very high, not mention the cost of doing business.

Japanese people and employers need more revenue, and be allowed to keep most of it. The sales tax increase was an unwise, foolish decision, and shouldn't be repeated.