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
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.East Asia Forum
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....
The growing importance of Asia's major economies will continue in 2018 and beyond, according to a league table that sees the region dominating in terms of size in just over a decade.
The report by the Centre for Economics and Business Research in London sees India leapfrogging the UK and France next year to become the world's fifth-biggest economy in dollar terms. It will advance to third place by 2027, moving ahead of Germany.
In 2032, three of the four largest economies will be Asian - China, India and Japan - and, by that time, China will also have overtaken the U.S. to hold the No. 1 spot. India's advance won't stop there, according to the CEBR, which sees it taking the top place in the second half of the century.
Also by 2032, South Korea and Indonesia will have entered the top 10, supplanting Group of Seven nations Italy and Canada.
In October 2014, the International Monetary Fund said that China had overtaken the US as the world's largest economy when it is measured by purchasing power parity. The PPP measurement is based on the rationale that prices of goods are not the same in individual countries.…Ecns
Japan is different, right? Japan has a different culture, right? Japan has sustained low unemployment, low inflation, low interest rates, high public deficits and high gross public debt for 25 years, but that is cultural, right? Even the mainstream media is starting to see through the Japan is different narrative as we will see. Yesterday (August 14, 2017), the Cabinet Office in Japan published the preliminary – Quarterly Estimates of GDP – which showed that the Japanese economy is growing strongly and has just posted the 9th quarter of positive annual real GDP growth. Private consumption and investment is strong, the public sector continues to underpin growth with fiscal deficits and real wages are growing. The Eurozone should send a delegation to Tokyo but then all they would learn is that a currency-issuing government that doesn’t fall into the austerity obsession promoted by many economists (including those in the European Commission) can oversee strong growth and low unemployment. Simple really. The Japan experience is interesting because it demonstrates how the reversal in fiscal policy can have significant negative and positive effects in a fairly short time span, whereas monetary policy is much less effective in influencing expenditure....Bill Mitchell – billy blog
The unexpectedly strong GDP print was driven by a 9.9% jump in private non-residential investment as well as an striking 21.9% annualized surge in public investment as some of the public works spending included in last year’s economic stimulus package starting to emerge; meanwhile exports declined....Zero Hedge
Japan’s economy shrunk 0.4% in the second quarter of the year, official data showed on Monday, underscoring how the prime minsister’s “Abenomics” growth programme has yet to grain traction.
Weak domestic consumption and slow exports weighed on the world’s third largest economy, which shrank an annualised 1.6%, after posting growth in the previous two quarters, according to the cabinet office.
However, the data came in slightly better than the market’s expectations for a fall of 0.5% and the main Nikkei stock market index was up strongly by 0.6%.
Private consumption, which accounts for about 60% of Japan’s GDP, fell 0.8%, as exports dropped 4.4%.
“The sharp plunge from the previous quarter’s surprise growth was partly due to disappointing demand for Japanese products in the US, Chinese and other resource-exporting markets,” SMBC Nikko Securities said in a commentary.The Guardian
