1. Japan cannot borrow itself into prosperity, that is an insane idea that defies common-sense and that is exactly what QE via deficit spending is.
2. The idea that hyper-inflation is not possible while an economy is stagnant is foolish, because the economic conditions can change on a dime (like recently in the U.S.) or with tariffs, or war, etc., that could leave banks and businesses holding a ton of excess cash. Hyper-Inflation only requires a large amount of currency in circulation to happen as a potentiality, if Japan embraces a more radical QE program, those conditions will be met (period), and it would only take a sudden market change to cause everything to come crashing down.
ThirdTerm wrote:The Japanese economy is likely to grow 1.5 percent in price-adjusted real terms in the fiscal year starting in April 2019, while it's expected to expand 2.8 percent in nominal terms. But in fiscal 2019, the country's economic growth will be offset the hit from a planned sales tax hike to 10%. The Japanese economy has been malignant for over two decades because the government keeps raising sales tax rates to make up for the budget shortfall, which is a suicidal fiscal policy or harakiri. After the government raised the sales tax to the current 8 percent from 5 percent in 2014, private consumption slumped and took some time to recover. It was much worse when the rate was raised to 5 percent in the 1990s. But the government keeps making the same mistake, prolonging the economic depression. The Japanese economy was strong when there as no sales tax in the 1980s and it went wrong immediately after the initial introduction of the sales tax in the early 1990s. Cutting the rate to 5 percent or less will stimulate the economy by encouraging private consumption.
Excellent. Well said.
Crantag wrote:Japan are practically the innovators of 'quantitative easy' (ryouteki kanwa), which is the practice of printing mass amounts of money.
It has persistently failed to provide a solution to Japan's economic problems.
It's funny how you include the bit about encouraging Japanese to buy Japanese products as a patriotic duty. This is exactly what Japan has been doing for many decades.
What you have suggested has basically been persistent policy in Japan, and has not been successful. In addition, the level of national debt is very high and is a longstanding concern in Japan. At the same time, they are short on revenues.
Also excellent. Well stated.
JohnRawls wrote:I imagined it. This does not change the core issue for Japan. It is hard to grow if your population is ageing and shrinking. Manpower is your economy and if you have less of manpower then the economy will also suffer. It a question of simple math. A population of Estonia can't have the same GDP as the US, simply because we are far less in numbers. There is a question of local development but Japan is already a very developed country. To some degree automatisation can compensate for man power but there is a limit to that also.
Also true, which means that Japan must increase its population or decrease its rate of dependency by those that cost the nation a shit-ton in funds.
You are right to note that automation cannot solve this problem alone, that is a transhumanist wet-dream.
However, if you want to maintain a state-funded subsidization of the elderly in an aging population, you will only see an increase in people becoming elderly at a disproportionate rate in comparison to children being born and entering the work-force. This a praxeological given.
Ending government subsidy for elderly care or privatizing it would solve the problem, as the problem with any social security system is that is disincentivizes younger generations caring for the elderly which was historically their responsibility and in turn having their own kids which were essentially their own retirement plan.
Now, since this is not likely to happen, the only two remaining options (other than just killing old people fashy-style) is to increase the birth rate artificially by subsidy (which they are trying to do) or import cheap labor via immigration (which Japan has refused to do).
The problem with the baby-subsidy program is that its not working. The Japanese seem too proud to take hand-outs for babies, really don't want to have babies in general, and now live in a hyper-urban culture that is fairly hostile to maternal necessity.
Japan needs to eliminate its subsidy for the elderly and cut taxes and let system work itself out, or immigrate foreigners and destroy its own culture.
something has got to give, but no MMT fantasy scenario will save them.