30 December 2014

The Japanese Economic Dilemma in a Nutshell

Here is a note from a friend in Japan:
In today's Nikkei (Japanese version), on page 5, tucked behind all the hype about the government's decision to lower corporate taxes, in hopes that major companies will raise wages, was a short article on "three miscalculations about the economy" this year.
1. Tax revenues increased with the increase in the sales tax but consumer spending fell. Tax revenues expected to increase by about 5 trillion yen.
2. Weaker yen and higher stock market improved family assets for some I would say, but exports did not improve, and were about 8% lower than 4 years ago.
3. CPI (excluding fresh food) increased, resulting in a real wage decline. Rreal wages have been falling since mid 2013 and are now around 4% lower year over year.
Over the past few days I have been reading about the so-called lost decade of the 1990s and the government's policy decisions to try to kick-start the economy.

In 1990 the government had about 60 trillion in tax revenues and 69 trillion in general account total expenditures.

Now, the government estimates 52 trillion in tax revenues for fiscal 2014 but has more than 95 trillion in expenditures.

Even a second grade student can see that something is not working.

As you know, I think that there are three things that must be done.

Reform, reform, reform.

The Japanese economy is burdened with an unusually bad demographic problem, made much worse by the burdens of insider dealing, crony capitalism, and zombie banks and their corporations.

And its greatest burden of all is an elite that serves itself and its friends first and foremost, and that finds a greater kinship with its global counterparts than with the people whose interests it purports to represent.
"The conflict between the East and West was designed to scare the people of the world into accepting a convergence of these two monopoly systems of authoritarian power. The end result was to be a new Imperial Order and a New World Empire run by an elite self-perpetuating oligarchies from the leading nations of the earth."

Carroll Quigley, Tragedy and Hope, p. 860