Sunday, September 29, 2019

Bill Mitchell — Japan about to walk the plank – again

Japan is about to walk the plank again when it follows through on a previous government decision to increase the consumption tax by a further 2 per cent on October 1, 2019. That means it rises from 8 per cent to 10 per cent. The latest fiscal documents suggest the government is hyper-sensitive to the historical experience, which tells us that each time they have fallen prey to the deficit terrorists who have bullied them into believing that their fiscal position is about to collapse, consumption expenditure falls sharply and the government has to respond by increasing the deficit even further to compensate. But, notwithstanding their caution (as evidenced by some permanent and temporary spending measures to offset the significant loss of non-government purchasing power that will follow the consumption tax hike, the fact remains that the policy shift will be undermine non-government spending and growth and is totally unnecessary. Moreover, the main problem in Japan at present is the lack of spending overall – non-government consumption expenditure has not yet recovered from the last consumption tax hike in April 2014. So far from raising taxes, the data on the ground is telling us that they should be increasing the fiscal deficit. This is another example of a few conservative politicians, being told by unaccountable mainstream economists to introduce policies that will damage the material prosperity of the ordinary Japanese worker and their families. And when we consider that the time is approaching when the debt-servicing burden for the government is approaching negative territory, then the consumption tax hike looks even more ridiculous.
So much for Japan being an MMT test case. MMT is more than deficit spending.

Bill Mitchell – billy blog
Japan about to walk the plank – again
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia


Matt Franko said...

“Recall, that the tax was first introduced in April 1989 – the rate was 3 per cent. They claimed at the time that the tax was necessary to fund welfare spending – in relation to its ageing society.

So from the outset, the justification for the tax was flawed.”

So they have an aging society short of labor (real terms) so they want to prevent “inflation!” So they raise taxes a bit to prevent “inflation!” which is MMT 101 so what’s the problem??????

Iow if they increased govt spending there isn’t idle labor available to be activated by the increased govt spending so they increase tax a little bit... MMT 101...

But yet Bill is complaining about something????

Matt Franko said...

“Japan’s unemployment rate stood at 2.4 percent in May, unchanged from the previous month, as the labor market remained at its tightest in decades, government data showed Friday.”

So if govt want to increase spending in some sector they would want to then offset it by a tax increase to prevent “inflation!” ie mmt 101

What’s the problem?

Matt Franko said...

Hey maybe like KV and S400 think, Japan can implement a Job Guarantee and Japan can make their old people in wheelchairs with no legs and diabetes get a job to get some “money!”....

Matt Franko said...

Comment over there:

Monday, September 30, 2019 at 10:25
Hi Prof Mitchell, given that unemployment in Japan is 2.2% and youth unemployment is 3.4% – low, but above historical lows – and there is no sign of inflation (probably never will be!), is your prescription aimed at simply moving the economy to its productive potential so as to optimise economic welfare? Are the Japanese doing “OK” in a low growth environment? Kind regards.”

I don’t know about a job guarantee but one thing I’ll guarantee is that that question will never be answered....

Kaivey said...

You still don't get it, I meant people on the Job Guarantee programme can help people in wheelchairs and old people.

I think the JG is a fantastic way to rebuild communities. Too many ppl sitting around with nothing to do, and they can't afford a social life, so the JG will be terrific for them.

S400 said...

It becomes more and more obvious that Matt cannot grasp content larger than what fits in a tweet and that together with that he is completely driven by his political bias where cherry picking with no regards to what is actually said or written is his favorite tool together with him ascribing made up stuff about this and that to others .

Stupid 101

S400 said...

“I’ll guarantee is that that question will never be answered”

Bill hasn’t turned off comments but Matt has. So I’ll guarantee that Matt will not answer any questions related to Matt’s own posts.

Matt is as usually just throwing stones in his glass house. Not many unbroken windows left in that house.

Matt Franko said...

KV yo there is a SHORTAGE of care workers over there:

Just go get trained and qualified and walk right into a job today.... might have to pass the urinalysis though....