The 1 economic experiment Shinzo Abe won't try Jeff Spross

Spoiler: MMT-informed fiscal policy.

The Week
The 1 economic experiment Shinzo Abe won't try

Jeff Spross

Bill Mitchell — Q&A Japan style – Part 5b

This is the final part of a two-part discussion about the consequences of a currency-issuing government exercising different bond-issuing options. The basic Modern Monetary Theory (MMT) position is for the currency-issuing government to abandon the unnecessary practice of issuing debt (which is a hangover from the fixed exchange rate, gold standard days). Currency-issuing governments should use that capacity to advance general well-being and providing corporate welfare to underpin and reduce the risk of speculative behaviour in the financial markets does not serve any valid purpose. However, when we introduce real world layers (politics, etc) we realise that some pure MMT-type options are not possible. This question introduces just such a case in Japan. Given the political constraints, we are asked to choose between two options for central bank conduct, when the government does issue debt: (A) Buy it all up in the secondary bond markets. (B) Leave it in the non-government sector. In this final part, I go through some of the considerations that might influence that choice....

Bill Mitchell – billy blog
Q&A Japan style – Part 5b
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell – [Annotated] Interview with Asahi Shimbun in Tokyo – November 6, 2019

During my recent trip to Japan, where I made several presentations to various groups, including a large gathering in the Japanese Diet (Parliament), I received a lot of press interest, which is a good sign. I am slowly putting together the translated versions of some of the print media articles. Today, I provide a translation (with my annotations) of an interview I did with the centre-left newspaper – Asahi Shimbun – on November 6, 2019 in Tokyo. This is a daily newspaper and is one of the largest of five national newspapers in Japan. It has an interesting historical past but that is not the topic of the blog post today. The article opened with a statement introducing Modern Monetary Theory (MMT) and then followed a Q&A format. I have expanded the answers reported in the paper to reflect the actual answers I gave to the two journalists during the interview and to a wider press gathering at an official press conference the day before in Tokyo.

Bill Mitchell – billy blog
Interview with Asahi Shimbun in Tokyo – November 6, 2019
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Japan announces a stimulus as the Right take over Bolivia

The latest South American progressive government to be taken over by right-wing thugs sponsored by the US is Bolivia.

This comes just after the ousted President Evo Morales cancelled a 2018 contract with a German company to mine the nation’s lithium deposits.

He was reported to have said:

Bolivia’s lithium belongs to the Bolivian people … Not to multinational corporate cabals....

Bill Mitchell – billy blog
Japan announces a stimulus as the Right take over Bolivia
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell – billy blog Q&A Japan style – Part 1 through 4 of 4

Bill's 4 part series on Japan.

Bill Mitchell – billy blog
Q&A Japan style – Part 1

Q&A Japan style – Part 2

Q&A Japan style – Part 3

Some reflections on my time in Japan while I am too busy to write

Q&A Japan style – Part 4

Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Q&A Japan style – Part 1

This is the first part of a three-part series this week, where I provide some guidance on some key questions about Modern Monetary Theory (MMT) that various parties in Japan have raised with me. The public discussion about MMT in Japan is relatively advanced (compared to elsewhere). Questions are asked about it and answered in the Japanese Diet (Parliament) and senior economics officials in the central bank and government make comments about it. And political activists across the political spectrum are discussing and promoting MMT as a major way of expressing their opposition to fiscal austerity in Japan. The basics of MMT are now as well understood in Japan as anywhere and so the debate has moved onto more detailed queries, particularly with regard to policy applications. So as part of my current visit to Japan, I was asked to provide some guidance on a range of issues. In my presentations I will be addressing these matters. But I thought it would be productive to provide some written analysis so that everyone can advance their MMT understanding. These responses should not be considered definitive and more detail is available via the referenced blog posts that I provide links to....

Bill Mitchell – billy blog
Q&A Japan style – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Will Japan's consumption tax hike fix its fiscal woes? — Masahiko Takeda UPDATED

Influential pundits have argued that under the current situation there is no need for the government to worry about fiscal sustainability. They have found support in the proponents of so-called modern monetary theory, who have cited Japan as real-world proof of their heterodox doctrine. Even some mainstream economists, including Olivier Blanchard, have advocated for fiscal activism in Japan and argued against the consumption tax hike. An important basis of their argument is the absence of inflation and the resulting very low interest rates. Still, most mainstream academic economists in Japan are undaunted, sticking to their guns of prudent fiscal management.
Unfortunately, discussions of sustainability, including fiscal sustainability, are intrinsically vague because they involve the future. Since the ability to forecast economic conditions over the medium to long term is woefully weak, it is impossible to settle the debate one way or the other. Without taking sides, however, there remain proposals which should receive no objections from both sides....

East Asia Forum
Will Japan's consumption tax hike fix its fiscal woes?
Masahiko Takeda | Professor of Economics (retired) at the School of International and Public Policy, Hitotsubashi University, Tokyo

Brian comments:

Bond Economics
Quick Comment On Takeda Article
Brian Romanchuk

Bill Mitchell — What is the problem with rising dependency ratios in Japan – Part 2?

This is Part 2 of my blog posts on population shifts in Japan. In – What is the problem with rising dependency ratios in Japan – Part 1? (October 28, 2019) – we considered the evolution of dependency ratios in Japan as a precursor to considering the nature of problems that accompany a rising dependency ratio. The purpose is to disabuse the public debate of the idea that rising dependency ratios constitute a fiscal crisis and point to the increasing prospect of fiscal insolvency. That erroneous assertion has been used as one of the justifications for pursuing austerity policies, which damage growth, cause rising unemployment and generally miss the point. The problem with this construction is that the solution adopted by the ‘sound finance’ lobby (austerity) to their ‘non problem’ only serves to exacerbate the real problem. Today, we will consider the productivity challenge that lies at the heart of the issues a nation with a rising dependency ratio will face.

Bill Mitchell – billy blog

What is the problem with rising dependency ratios in Japan – Part 2?
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — What is the problem with rising dependency ratios in Japan – Part 1?

Later this week I will be in Japan for a series of presentations and meetings with a broad spectrum of Japanese politics. The various hosts of the events which I will confirm in Wednesday’s blog post are all committed to advancing an MMT understanding in Japan and ending the hold that ‘sound finance’ has on the public policy debates and regularly lead to poorly contrived policy shifts (such as the recent sales tax hike) in pursuit of lower fiscal deficits. As part of my preparation for my presentations I have been studying various aspects of the Japanese situation so that I can address the issues with a solid evidence base. One of the recurring themes put forward by the ‘sound finance’ lobby (which includes much of the economics profession both inside and outside of Japan) is that its ‘challenging’ demography demands that the Government move to surplus to ‘save up’ to avoid the impending fiscal disaster associated with a rising dependency ratio. This issue is not confined to Japan, of course. It is just that Japan’s demography is a little further down the ageing road than other nations. But while rising dependency ratios matter and need attention, the construction of the problem by the ‘sound finance’ lobby misses the point completely and their ‘solution’ to their ‘non problem’ only serves to exacerbate the real problem. That is what today’s blog post is about. In Part 2, I will elaborate more on the nature of the productivity challenge and some of the options that have been suggested to deal with it.

Bill Mitchell – billy blog
What is the problem with rising dependency ratios in Japan – Part 1?
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Q & A Japanese government style – denial has no boundaries

A little bit of a different blog post format today. I mentioned in this blog post – Apparently core MMT idea is now supported by the mainstream (October 16, 2019) – that the Japanese government had taken issued a statement, by way of a formal answer to a series of questions from Japanese CDR politician Kazuma Nakatani on the opening day of the new Parliament (October 4, 2019). The Japanese government reply was not available in full at the time I wrote that but it was reported in the Japanese Media that the Government response could be summarised as “As a government, we don’t implement policy based on the idea that Japan is a successful case of MMT because its inflation and interest rates are not rising despite massive debt … We are working to restore fiscal health”. Which I thought was an interesting way of trying to deny the undeniable but also missed the point somewhat – being that MMT is not a ‘case’ but rather just provides an alternative lens to understanding the way in which modern monetary systems operate, the capacities of the currency-issuing government within those monetary systems, and the consequences of particular policy choices. In that context, over the last 3 odd decades, the Japanese government has pushed policy into new domains – large-scale central bank government bond purchases with continuous, and, at times, relatively large fiscal deficits yet has seen interest rates fall to zero and below, inflation low to negative and negative long-term bond yields. The consequences of the policy choices have been anathema to those predicted by mainstream macroeconomists. Japan has essentially defied mainstream economics and demonstrated its falsities. The only body of macroeconomic thought that gets close to explaining the Japanese situation is Modern Monetary Theory (MMT). That is why our work is being discussed at the highest levels in Japan. Anyway, today, I can present full translations of the Questions and the Government response with my annotations of that response. My translation was considerably enhanced by Kobayashi Chie and I thank her heaps for her help.

Bill Mitchell – billy blog
Q & A Japanese government style – denial has no boundaries
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

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

Personality, Progress And Promise In Japanese Leadership — Wisdom Tree

At least to this observer, Europe and the U.S. bring to mind the fumbling and growing desperation that Japan went through during the long period of political instability before strongman Abe arrived. To turn modern monetary theory into practice, you need functioning and decisive fiscal coordination and plans that go beyond the expediencies of annual budget cycles or election cycle pork-barreling. No fiscal policy vision, no fiscal dominance... make no mistake! Abe-Aso-Kuroda do know what they want to spend on.

In clearer terms, watch for a boost in fiscal spending if or when global or local economic momentum loses steam. The Bank of Japan will finance the added borrowing requirement if excess savings fail to absorb it.

More evidence that monetary policy is waning and fiscal is waxing. It's likely that this will involve a gradual switch, however, rather than a sudden one, absent a pressing crisis that forces a faster pace of change.

Seeking Alpha
Personality, Progress And Promise In Japanese Leadership

Wisdom Tree

Economists question Japan's planned consumption tax hike — Eri Sugiura

But the impact of the tax hike on the economy remains uncertain, and numerous experts have already said it may lead to further stagnation. The country is in the middle of an economic downturn, they say, and the tax increase will only worsen low inflation.
Some U.S. scholars agree. "Taxes are for subtraction and to remove spending power from someone," said Stephanie Kelton, a professor of economics and public policy at Stony Brook University. Kelton, a leading MMT advocate, criticized the planned tax increase in a speech given in Tokyo last week. "If you are not currently experiencing an inflation problem -- and you are not -- then [raising] the consumption tax does not make economic sense to me."

MMT encourages government to run a deficit and print money as long as it does not overheat the economy. If inflation begins to emerge, it can be mitigated by cutting government spending and increasing taxes. But other than that, the government should spend on economic stimulus programs to increase employment as much as possible.

Nikkei Asian Review
Economists question Japan's planned consumption tax hike

Eri Sugiura, Nikkei staff writer

Modern money theory and its challenges Sayuri Shirai

Modern monetary theory (MMT) has recently gained prominence in light of doubts about the effectiveness of monetary policy in addressing economic shortfalls. This column assesses the implications of implementing the theory’s policy prescriptions, and the challenges it presents in the case of Japan – an economy that some have argued has already been subject to such policy. Japan’s labour shortages and low inflation mean modern monetary theory’s fiscal stimulus suggestions may be harder to implement than they initially seem....

Stephanie Kelton was recently in Japan talking up MMT. This is a response. It is a serious article on MMT that gets the outline reasonably correct and offers comments on its applicability to conditions in Japan. It's a should-read.

VoxEU
Modern money theory and its challenges
Sayuri Shirai | Professor, Keio University; Visiting Scholar to ADB Institute; and, former Board Member, Bank of Japan

Nippon— No Problem with Japan's Huge Debts: MMT Advocate Kelton

Stephanie Kelton is in Japan talking up MMT. This is a basic post with no negatives. More progress.

Nippon.com (Japan)
No Problem with Japan's Huge Debts: MMT Advocate Kelton

Randy Wray — JAPAN DOES MMT?

In recent days the international policy-making elite has tried to distance itself from MMT, often going to hysterical extremes to dismiss the approach as crazy. No one does this better than the Japanese.

As MMT began to gather momentum, its developers began to receive a flood of calls from reporters around the world enquiring whether Japan serves as the premier example of a country that follows MMT policy recommendations.

My answer is always the same: No. Japan is the perfect case to demonstrate that all of mainstream theory and policy is wrong. And that it is the best example of a country that always chooses the anti-MMT policy response to every ill that ails the country.

Reporters find that shocking. Biggest government fiscal deficits in the developed country world? Check. Highest government debt ratios in the developed country world? Check.
Isn’t that what MMT advises? No....

From the MMT perspective, what Japan needs is a good fiscal stimulus, albeit one that is targeted....

Add the Wray Curve to the Laffer Curve, the Phillips Curve, the Kelton See-Saw and the Krugman Cross.

New Economic Perspectives

JAPAN DOES MMT?

L. Randall Wray | Professor of Economics, Bard College

Bill Mitchell – Japan Finance Minister getting paranoid about MMT

The debates about MMT are expanding. There are weird offerings springing up each day. I read something yesterday about how MMT is really just Marxism in disguise and therefore a plot to overthrow entrepreneurship. Well in a socialist society there will still be a monetary system! Most of the critiques just get to their point quickly – MMT is about wild printing presses undermining the value of the currency! That should summarise 25 years of our work nicely. But there are also other developments on a global scale. A few weeks ago there was a lengthy debate in the Japanese parliament during a House of Representatives Committee hearing considering whether the October sales tax hikes should continue. The Finance Minister, Taro Aso was confronted by Committee members who indicated that it was useless denying that Modern Monetary Theory (MMT) was some abstract theory that was wrong because the Japanese are already “doing it”. The Minister told the hearing that MMT was dangerous and would undermine financial markets if anyone said otherwise. An interesting discussion took place. It highlighted some key features of MMT. It also indicates that progress is being made in the process of education aimed at giving people a better understanding of how the monetary system that we live within operates....

Bill Mitchell – billy blog
Japan Finance Minister getting paranoid about MMT
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — Japan still to slip in the sea under its central bank debt burden

President Trump banned a CNN reporter only to find his position overturned by the judicial system. Well CNN is guilty of at least one thing – publishing misleading and alarmist economic reports about Japan. In a CNN Business article last week (November 13, 2018) – Japan’s economy has a $5 trillion problem – readers were told that the Bank of Japan has no “dwindling options to juice growth if a new crisis hits” because “it’s now sitting on assets worth more than the country’s entire economy”. The real story should have been that the Bank of Japan continues to demonstrate the categorical failure of mainstream macroeconomics and, conversely, ratify the core principles of Modern Monetary Theory (MMT). That is what the Japanese experience since the early 1990s tells us. And all the stories about special cases; cultural peculiarities, closed markets, etc that the mainstream economists wheel out when another one of their predictions about how Japan is about to sink into the sea as a result of its public debt levels, or that interest rates are about to go through the roof because of the on-going and substantial fiscal deficits; or that inflation is about to accelerate because of the massive monetary injections; and more, are just smokescreens to divert our attention from the poverty of their analytical framework. The Japanese 10-year bond trade is called the ‘widow maker’ because hedge funds who try to short it lose big. The Japanese monetary system is my real-time, non-linear economic laboratory which allows all the key macroeconomic propositions to play out live. And MMT is never very far off the mark. Try juxtaposing New Keynesian theory against Japan – total dissonance....

Bill Mitchell – billy blog
Japan still to slip in the sea under its central bank debt burden
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Arms race ratchets up

Sputnik International
Analysts Explain How China May Respond to US Push to Militarize Asia-Pacific

Deutsche Welle
NATO to beef up in face of 'assertive' Russia

The Cipher Brief
Securing Orbit: Countdown to a Space Corps?

Russia Feed
Crimea has a shipyard ready to build a new fleet of Russian aircraft carriers

USNI
UPDATED: 7 U.S. Aircraft Carriers Are Now Simultaneously Underway
Sam LaGrone

Ryan Browne — Kazakhstan plans to launch its own cryptocurrency

• Kazakhstan's government-supported Astana International Finance Center (AIFC) said Tuesday it had signed a deal of cooperation with Maltese firm Exante
• Exante said it would work with the AIFC to develop the ex-Soviet nation's untapped cryptocurrency market
• Kazakhstan's entry into the digital currency ecosystem would be underpinned by Exante's new blockchain platform, 'Stasis'

When it rains it pours.

In August, Estonia proposed its own state-backed digital asset, which would be called "estcoin". The small Eastern European nation said it was considering the launch of estcoin through an initial coin offering (ICO) — a crowdfunding method that has garnered much scrutiny in recent weeks.

And last month, Japan signaled the potential launch of its own digital currency, called J-Coin....

CNBC
Kazakhstan plans to launch its own cryptocurrency
Ryan Browne