Japan Inflation Budget: Updated Feb. 5, 2024.

 

Japan enacts $90 billion FY 2023 extra budget for inflation relief

Article Source: https://mainichi.jp/english/articles/20231129/p2g/00m/0na/037000c

Article:

TOKYO (Kyodo) -- Japan's parliament on Wednesday enacted a 13.20 trillion yen ($90 billion) extra budget for the current business year through next March to fund steps to soften the blow of rising prices and aid the economy.

The funds are needed to provide 70,000 yen to low-income households hurt by the cost-of-living crisis, retain subsidies to lower fuel costs until next spring and make the nation more competitive through increased investment in key areas like semiconductors, artificial intelligence and space.

The spending plan cleared the House of Councillors, following its passage through the House of Representatives last week. In a rare move, some opposition parties joined the ruling coalition of the Liberal Democratic Party and the Komeito party to support the budget.

Ideas:
While the new extra budget it good and needed, why did it take this long for the Japanese government to try needed help to Japanese households, when inflation has been continuing now for maybe three years.

Yes, a government can't do everything but something more than energy subsidies would have helped many households in Japan.

Of course maybe just maybe if the Bank of Japan had loosened its ultra policy rates maybe again there might have been a different effect on inflation in Japan.

But the Bank of Japan, for good or bad, has repeatedly said the Japanese economy is too weak for key interest rate increases. 

Article:

Prime Minister Fumio Kishida has faced a tough time trying to stem falling public support amid a series of scandals hitting Cabinet members, despite his pledge to do all he can to support the inflation-hit economy.

He has also been in the hot seat during parliamentary deliberations on the budget, following recent revelations that multiple factions within the LDP, including Kishida's, underreported income from fundraising parties.

His government's economic package, including a temporary tax cut of 40,000 yen per person that will be implemented next year, has so far done little to turn the tide in his favor.

Ideas:

Again, in a market economy, the government can only do so much and despite what people think a government doesn't have unlimited money to use on every need in society.

Of course, unfortunately, politics intertwines with the governing of society and the government, and at times, leaders of government will do what is needed to make sure they have support from society.

A 40,000 tax cut is very good and needed, and again, a government can't do everything, But for the low income groups and the fixed income groups, is it enough. For the upper income groups they probably don't need it but many do in Japan. 

To be fair, many Prime minsters have consistently had low ratings as it seems the Japanese public is never happy, with it leaders, like everywhere else in the world.

Article:

"We will use all available policy tools to bring about pay hikes that will enable people to overcome inflation" while incentivizing companies to pay higher wages as we cut income and residence taxes, Kishida told reporters.

The opposition bloc has doubted the effectiveness of the proposed tax reduction while Koichi Hagiuda, the policy chief of the LDP, has expressed confidence it will be well received among the public when it goes into effect next June.

Ideas:

Again, a government can only do so much, but also at the same time, there are those in society who think a government should do everything. Some in society think the government has unlimited funds, money, to do things, and at times it seems like that with the way governments spend. 

The Bank of Japan, and the Japanese government seem to be relying on large companies to get the Japanese economy and society out of its inflation challenges. But the challenge is 70 percent of Japanese workers don't work for large companies but small and midsize companies, which in April of 2023, didn't give wage increases, or most of them didn't.

The opposition bloc has also suggest maybe reducing the sales tax at 10% now to less as a way to help Japanese society.

Article:

Of the 13.20 trillion yen, 8.88 trillion yen will be secured by issuing new government bonds, putting more strain on the coffers of already heavily indebted Japan.

The total size of government spending for fiscal 2023 will swell to 127.58 trillion yen, of which about a third will be secured by issuing government debt.

The government will step up work toward the end of the year to formulate a draft budget for the next fiscal year from April, faced with the difficult task of reducing spending closer to pre-coronavirus pandemic levels.

Ideas:

The Japanese economy and Japanese government, is probably the most heavily indebted economy in the world with debt to GDP running maybe 250% of GDP.  But most of the debt, if not all, is internal, and not owned by anyone outside of Japan as compared to Greece in 2010, which much of its debt was owned externally.

All governments say they will reduce spending, but most governments never reduce spending but instead continue to spend. Its like households, with good intentions to save and or reduce its extra spending, but most never do it due to emergencies and so on, and its the same with governments.

At the same time, there are going to be government situations can come up that will be considered important, and as a result more spending will take place.

Article:

The outcome of talks among the ruling coalition and the Democratic Party for the People over whether to end a freeze on a "trigger clause" on gasoline taxes will come into focus in the coming months. The small opposition party voted in favor of the extra budget after securing assurances that the issue will be discussed.

The clause, which enables gasoline taxes to be cut when certain conditions are met, was frozen to secure reconstruction funds in the aftermath of the 2011 earthquake and tsunami and the ensuing Fukushima Daiichi nuclear power plant accident. The DPP has been calling for its reinstatement.

Ideas:

Again, politics always has a part of governing, and different parties within a government, have different ideas. It will be interesting to see just what happens by April 2024, regarding subsidies and gasoline taxes. 

If inflation doesn't decrease and or remains higher than what the Bank of Japan feels is good, the gasoline tax subsidies will probably remain.

Nuclear power plants, after the 2011 incident, lost favor with the Japanese public, but nuclear power is clean and not every expensive, compared to gas and oil. But it going to take some time, to convince the Japanese public on the positives of nuclear power after the 2011 situation.

Have a nice day and be safe!