Japan Should Never Be Like Greece

Recent news of a new prime minister in Greece who is not so keen on the austerity measures imposed on Greece by different groups, might be welcome news. Yes Greece had a lot of debt but the austerity measures imposed on Greece in 2010 seemed to make matters worse instead of better. Its easy for other countries to ask a country to implement austerity to reduce debt problems as long as your country is doing OK. While most debt owed by Greece is from foreign sources, Japan's debt is mostly internal so it doesn't need to listen to others as closely, to rid itself of its debt. There might be other more sane ways to reduce the debt.

The Greece austerity experiment is a tragic example of how not to revive an economy and reduce the debt. Too many lives have been hurt in this tragic experiment. Its a classic case of dampening demand and reducing consumer and business sentiment, which is vitally important for economic growth. If Greece really wanted to reduce its debt and revive the economy, it should have found other strategies that would have increased demand and improved business and consumer sentiment as a way to increase revenues to reduce debt and improve economic growth.

Japan, in April 2014, almost tried a similar strategy, with its 8% sales tax hike. No country should increase taxes on a society where its consumers and businesses are already weary of the economy with any slight negative activity only causing an acceleration of reduced sentiment which reduces spending and investments. Japan doesn't need to worry about being Greece in that it doesn't need to worry too much about external voices and its debt. And it shouldn't try another tax hike strategy with its consumers voicing their disapproval by not spending up to their potential.

If Japan can come up with other strategies, as it is presently doing, it doesn't need to worry about becoming another Greece. Lets hope no country ever has to go through what Greece has gone through. Who knows how long it is going to take Greece to recover from failed austerity measures.


© 2015 Tom Metts,  all rights reserved