Japanese Govt. New Budget: Updated Feb. 27, 2024.

 

Japan to OK 112 tril. yen FY 2024 budget, shift from COVID-era aid

Article Source:  https://mainichi.jp/english/articles/20231222/p2g/00m/0bu/026000c

Ideas: 

While governments recognize the need to cut spending and reduce budgets, it rarely happens despite the their intentions, as politics and other priorities take center stage.

In this case, the Japanese economy is maybe the most debt laden economy in the world now, with no end in sight.

The Japanese government has tried to rein in its debt challenges, with a sales tax increase in 2014 and again in 2019, with both attempts resulting in decreased consumer spending, at least for the first few months.

Defense spending and social security spending maybe can't be helped as Japan wants to show its a strong defense oriented country with China nearby and because Japan is a aged society and getting older every year, it has no choice but to put a priority on social security at this time.

Its seems fiscal rehabilitation has never been a priority for the Japanese government, at least in its actions. But it does give lot of communication about reducing the debt challenge, but because of other priorities, like other governments never gets around to reducing the debt.

The cost-of-living crisis is a real economic situation that has been continuing since the pandemic started and seems like it might not end anytime soon, at least for many Japanese households.

While the Bank of Japan, keeps saying the Japanese economy has/is too weak to increase the key rate like in the US and the EU has increased the key rate, can have a lot of side effect which many more Japanese households will feel even more stress.

But at the same time, now may households and businesses might be thinking, which is worse, the situation now and or if they key rate was increased would be be better off or worse off?

Inflation in the US is finally decreasing, maybe due the key rate increase, but you can never tell exactly if the key rate increase had any real affect on the reduction in inflation.

Unfortunately, politics always has some say in what a government might do, especially if public support is decreasing.

As China continues to flex its muscles in Asia, Japan is beginning to respond with an increase in defense spending to show its military is also strong.

Japan has no choice but to address is social security costs as next to South Korea, its one of the most aged societies in the world and keeps getting worse.

At the same time, it along with South Korea has one of the lowest birthrates in the world. Increased spending on child care might help some, but its not going to solve the main problem companies helping working women with children and at the same time, the increased cost of raising children including the increased costs of education.

The 40,00 tax cut will help of course, but it is enough for the average family and a family might run through that it a month or two.

Of course, especially in Japan with it heavy debt challenge, governments can't do everything but maybe 40,000 is enough for now.

As usual, issuing bonds will increase the debt even more. But to be fair, its like households who take out emergency loans to make ends meet.

For the most part the Bank of Japan has not done much in terms of increasing it key rate other than increasing government bond yields only. 

Increased prices might have increased the consumption or sale tax revenue, but what has the Japanese government done with the extra revenue? 

A tax cut is good and needed but again, its it enough and or can the Japanese government afford to give a tax refund with it heavy debt challenge.

Have a nice day and be safe!