Correction - Richard Katz Response To “Urban Harvest Tokyo”

In my post yesterday, I stated Richard Katz wants the micro farms inside Japanese cities abolished. I wrote off the top of my head and did not confirm with Mr. Katz his actual position.

This is his actual position, taken from an email to me:

I never said that these tiny farms should be abolished. What I said was that the property taxes on farmland, particularly urban farmland, should be the same as those on other land, and that the assessments for tax purposes should be the same. What I suspect is that many of these would no longer be commercially viable without the tax break and would go out of business. If so, the farmers should be allowed to sell their land to agribusiness or even nonfarm uses.

I have as much appreciation for nature and fresh garden vegetables as the next guy, but I don’t see why the rest of taxpayers should subsidize the old farmer in your neighborhood or your food budget. If you want him to survive, pay him the price it takes to cover his costs, without getting help from other taxpayers. When I left the speech at Temple University where you heard my comments, one man came up to me and told me that, on weekends, he went out to the nearby countryside to do gardening on land owned by someone else who had become too old to use it. It was his hobby. His hobby is subsidized by other taxpayers. My dad had a vegetable garden in our backyard every year, as did many people in my small town. But none of them required the rest of the taxpayers in the town and state to subsidize his hobby.

What I also said was that, all over Japan, land use laws that make it difficult for farmers to sell their land for nonfarm purposes. They should be abolished. That way, farmers who survive only because of huge subsidies, and most of whom are part-timers anyway, could make some money by selling their land for other purposes, if they chose. As of 2010--the latest figures I have readily at hand—the ratio of abandoned farmland as of 2010 stood at 14% IN URBAN AREAS, 6% in flat farming areas, 14% in hilly farming areas, and 16% in mountainous farming areas. All of these figures are about double their levels in 1995 and will only increase as farmers age and pass away. Land that could be used for better purposes lies useless.

How does it benefit anyone to have 14% of urban farmland lying around useless, even with the tax breaks. One wonders how much would be abandoned without the tax breaks.

My apologies to Rick Katz for misrepresenting his position.

Image: Man hoeing marginal urban farmland plot. Setagaya City, Tokyo Metropolitan District on July 18. 2014.
Image courtesy: MTC

A More Serious Slapping Around of Abenomics Cheerleading

Edward Hugh has a sharp review of the negative view of Abenomics, or perhaps more properly the dismissive-as-irrelevant-and-possibly-quite-harmful view of Abenomics:

The Real Experiment That Is Being Carried Out In Japan

Particularly thought-provoking are the quotations from Keynes, showing both the incredible brilliance of the man and the continuing validity of the old saw, "There is nothing new under the sun."

I agree with almost everything in the post, particularly with the quotations from the speeches of former Bank of Japan governor Shirakawa Masaaki, whom the Kool Kids in this blessed land's business and media elites all feel free to disdain and revile. Shirakawa is revealed to be who he is and what he always was: a central banker blessed with intelligence, humility and a conscience.

With all that is good (and there is a lot of it) I think Hugh does himself a disfavor with the cheap shot at the what may be the most important goal of the creation of inflationary expectations: pressing savers to convert their assets in to real goods or put them into higher risk/higher return investments. A critic would point out that "Uh, that's sort of the point of the program. Duh."

The demographic angle of the story is that while there is a vast pool of cash that could be deployed in lifting the economy to a higher level of activity, almost all of it is in the hands of persons over 60 years of age. Seniors are very, very conservative about their assets and cash, clinging to low-or-negative return real estate or money kept in bank accounts...or in the safe at home.

The government is trying some direct methods to get older citizens to turn over their savings to younger citizens, the most famous/infamous being the tax free accounts for the education of grandchildren (a plan which has been widely derided as just a tax avoidance scheme for the extremely wealthy). Increased taxation of the assets of retirees would be the one, absolutely effective, politically lethal (those damn retirees vote, a lot) solution.

Debasing the currency and creating the desire to convert cash into something that is meaningful and useful is an actual, non-ridiculous goal of induced inflation...the caveat being "but what if instead of increased consumption and domestic investment the result of debasing of the yen is capital flight, with savers sheltering the current value of their money in overseas accounts and assets?"

I guess we have to keep an eye on the yen. I am sure if someone popped an inquiry into Richard Katz's mailbox he would have something to say about what the yen level should be, using trade-adjusted figures.

Later - Richard Katz responds in comments. He corrects my incautious claim that he would know at what level the yen should be.

No one knows this, save, supposedly Mr. Market.

What Richard Katz can tell you is what the long-term average real exchange rate has been, and whether or not the Abe governments disengenuous program to crush the "high yen" has firm intellectual roots.

Nota Bene: All comments to Shisaku are moderated, except my own.

Not Half Bad

On August 1, 2007, Richard Katz and Peter Ennis published an essay in Foreign Affairs magazine featuring predictions for the upcoming Diet sessions in the aftermath of the LDP/New Kōmeitō wipeout in the July 27 House of Councillors election.

Aside from failing to predict the physical collapse of Abe Shinzō (who could have done that?) the two gentlemen did a commendable job of prognostication, methinks.

Nota Bene - If you are wondering where the "near-zero returns on the savings accounts that the elderly use to buy daily necessities" comes from, it is Mr. Katz's contribution to the discipline. Nothing makes him happier than winding it up, putting it on the floor and watching it roll about.

I have always waited for someone, preferably ancient and weather-worn, to rasp, "That's very nice Richard...but if my mind and memory have not gone completely dim, have we not been stuck in deflation for the past decade?"