Tuesday, January 22, 2013

A More Comprehensive View

Over at The Telegraph Ambrose Evans-Pritchard presents the pros and cons of Abenomics, with a bias toward an acceptance of Abe's program as being more than just a way of buying victory in the July House of Councillor's election. (Link)

I will admit it: I am a sucker for anyone who pays proper respect to Takahashi Korekiyo. Keysnesians of all nations should lay wreaths on the pedestal of the old man's statue (it is in the park next to the Canadian Embassy -- the former site of his home, the building having been moved to the Edo-Tokyo Open Air Architectural Museum) on the February 26 anniversary of his assassination.

Statue of Finance Minister Takahashi Korekiyo
Minato Ward, Tokyo Metropolitan District
June 12, 2007
Image credit: MTC
Former prime ministers have returned to the government as finance ministers three times in the modern era. Takahashi was the first to do so. His record of leading Japan out of the Great Depression places him in the pantheon of the greats of not Japanese but World History.

The second was Miyazawa Kiichi, whose return to the cabinet as finance minister had a decidedly less spectacular effect on the country's economic well-being. Miyazawa will have to be remembered for having been in charge of the Economic Planning Agency during the miracle years*.

Our present finance minister, Ambassador from Mangaland, bon vivant and empathy-challenged (Link) Aso Francisco Taro is the third former PM to take the helm of the nation's financial apparatus in a time of (in this case decidedly minor) economic crisis.

What a degenerate era we live in.

* Miyazawa, despite his huge contribution to the making of post-1945 Japan, has nearly vanished from public consciousness. The only online memorial to him seems to be a bleak page in the Hiroshima prefectural government's online Hall of Worthies. (Link - J)


williambanzai7 said...


Troy said...

I found http://www.mof.go.jp/english/budget/budget/fy2012/e20111224b.pdf ("Japan's Fiscal Condition") last week.

Chart "(2) Trends in General Account Tax Revenues, Total Expenditures and Government Bond Issues" showed how for most of the 1990s Japan was running a reasonably tight fiscal ship.

The construction spending was largely noteworthy in that it was the only deficit spending going on for a long time!

Japan's colossal national debt is AFAICT an artifact of the inability to raise tax burdens, which itself is largely due to the systemic over-commitment to investment in domestic real estate valuations.

If tax burdens were double (like they should be), real estate would be valued at a lot less, and that's not something anyone wants apparently.

"(7) Ratio of Major Expenditure Items in the General Account" is also interesting to me, in that it shows that 50% of the national budget is local grants + social spending, both of which are important redistribution flows. Another 24% is interest, which is just going back into the economy somewhere, too.

In my way of thinking, the important thing for Japan is that it continue to produce (and sell) more wealth than it consumes. It did stupendously well on this score 1960-1985 and still has a NIIP of ~$3 trillion to show for it.

Japan's wobbliness is just a domestic political issue the nation is going to have to work through somehow.

What was borrowed should have been taxed and what is being borrowed now is going to have to be taxed, unless the Japanese want to inflate away the quadrillion yen of savings they hold in JGBs.

"I don't have any solution, but I certainly admire the problem."

Troy said...

re the comment above.

Total central government spending is ¥90T/yr, $1T in current USD, or $8000 per capita.

This is not a massive government burden to be taxed, yet Japan has been running large deficits for the past 10-odd years anyway.

This is evident by the tax-to-GDP ratio, which is parlous compared to most of the OECD.


When a state borrows and not taxes, it has to later implement "austerity", start taxing more, or print (if it can) eventually.

Printing is the least disruptive policy change, alas.

MTC said...

williambanzai7 -

There can be no greater compliment than be the inspiration for the creative work of others.

MTC said...

Troy -

On the surface it would seem incautious to talk about the national government's immense issuance of debt financing bonds post-1998 whilst ignoring deleveraging by corporations and individuals over the same period. In a sense the government was creating liquid assets the private sector would/could not produce.

You rightly point out that nearly all (92% is the figure I hear quoted) of the 24.3% of the budget going to servicing the debt is Somebody's Income. Then again, since net debt is only half the total, the private sector is reaping half the income -- i.e., 12% of the budget. Thinking about the remaining 12%, interest one branch of the government pays another for holding on to goverment debt, makes my head hurt.

Troy said...

everything macro makes my head hurt, LOL

this subject is very similar to quantum electrodynamics, wheels within wheels.

I just read that the announced 2014 BOJ buying is ¥13T a month -- that's the entire central government budget every 7 months!

But what hit me is whither the DPJ's 10% tax rise plan. Doing a cursory google news search I see higher taxes are still on the card for 2014-2015.

So the BOJ plan for 2014 is kinda similar to their intervention post-Plaza, softening the shock of the yen going from 240 to 120 or whatever.

I think Japan would be happier with a ¥150 regime. Getting there from here is the difficult part but printing is necessary I guess.

People holding that one quadrillion yen of national debt should understand that they're not going to be paid. Just consider it ex-post facto taxation and move on . . .

Troy said...


is a chart I just made in excel from Japan's live birth #s.

This doesn't count immigration and other changes, just adds the births up, but it's close enough.

ISTM that Japan's going to Need People this decade and next!

Especially when you consider that their baby boom arrived 1947-49, and are all turning 70 at the end of this decade. They can't work forever!

I can't pretend to picture what's going to happen this decad -- i.e. what's coming over the horizon -- but this Abe thing is apparently a pretty big direction change!

Mebbe my semi-lifelong investment in teh Nihongo won't be a waste after all.

Anonymous said...


Well, at least you did post something less discouraged about Abenomics than your usual. Personally, I think Japan will be better off with Abenomics after the new appointment at BoJ in a few months.

The arguments have been laid out. Abe has his arm cocked and the dice will be cast. It does not matter that Abe may not be a Keynesian or that some crooks and profiteers will end up with a lot of public cash. Either Keynes and Takahashi were right or they were wrong.

I wish Abe and Japan good luck. Ganbare.

Anonymous said...

Also, I do not think Japan will be the one starting any currency war. Too many people think the yen is over-valued.

Anonymous said...

Also, a question to nobody.

If Abenomics does wreck Japan's economy, does CCP offer financial aid?