Japan gov't to OK 21 tril. yen economic package under fiscal dove Takaichi
Ideas
There is always this debate about how much a government should get involved in an economy as there those who think the government should not get involved and those who think a government's role is to help the economy if needed.
In the case of Japan, the Japanese government has been trying for years, if not decades, to get the economy moving in the right direction including fiscal spending and subsidies to combat inflation to no avail.
There is no guarantee that the new fiscal economic package is going to do anything to help the economy as previous Prime Ministers have done the same thing with almost no success.
Of course the Japanese government has to show that its trying to help society and fiscal spending makes good political sense if not economic sense too.
If fiscal spending was all that was needed to improve the economy and reduce inflation or at least relieve the stress of Japanese citizens then all of the past spending would have done the job, but even through there have been sincere efforts to improve the economy and even reduce inflation nothing seems to be working.
Next to China, Japan is one of the largest exporters to the US and most likely is going to see significant effects from the US tariff situation in the future if it hasn't yet.
Exporting has been the main economic driver of the Japanese economy ever since the end of the second world war. While exports have been good for Japan, it seems that Japan has very few other options besides exports to grow and improve its economy.
While Japan might still be the fourth-largest economy, it domestic economy seems to be stagnant and really growing much and or there seems to be few economic drivers to move the domestic economy forward.
Short-term inflation relief measures might be like just putting a band aid of an injury and hoping it will solve the problem. It might give some temporary relief but its not going to solve the inflation situation much.
But to be fair, inflation is very hard to solve as its still a major problem in the US and other places too globally.
Shipbuilding in Japan used to be a major industry until China and South Korea started building ships and then Japan lost a lot of market share. Its going take some significant investment to gain any kind of market share as again China and South Korea, at the moment, have most of the market share in shipbuilding.
There seems to a global race now related to AI or artificial intelligence and hopefully Japan has not entered the AI realm too late to gain any kind of traction to make a significant contribution.
It seems Japan is always funding a new economic package for something related to inflation or to improve the economic, which to be fair, hasn't been too successful lately, even though there have been sincere efforts.
Japan's supplementary budgets have exceeded 10 trillion yen in recent years, far above the several trillion yen typically seen before the COVID-19 pandemic.
The Japanese government just keeps on spending and as a way to try and improve the economy but again without much success.
Japan has one of the highest if not the highest debt to GDP ratios among advanced economies in the world but that doesn't seem to stop them from continuing to spend.
Having a high debt to GDP ratio now is not problem but it could be a challenge in future years as is could begin affect the Japanese pension system, the financial rating of the economy, and future fiscal spending in Japan.
Yes, there is the possibility of stimulating demand could be a negative affect as it will have a multiplier effect on inflation in the Japanese economy, as more spending by the Japanese government will cause or have the affect of other spending in the economy, which could increase prices.
But the effect could be just marginal as inflation has reduced the disposable income of Japanese citizens and even though there might be subsidy to help with some of the household cost, it might not be enough to have a significant effect on an increase in spending.
And again, yes the debt to GDP ratio can be a serious concern, but the Japanese government has not seen it has being a major concern yet, but that could change in the future.
Other Prime Ministers, recently, had cash handouts and even subsidies related to gas and electricity but to to no avail, as household spending didn't seem to increase that much as it didn't really increase disposable income for households.
And the cash handout is a one time situation and that can easily be spent or used up very quickly by most households and then they back to their normal situation.
A reduction in the gas tax might be good, but is it going to help everyone in the Japanese economy or just those who have cars. But its still good and needed to help car owners who might have to drive a lot in Japan.
The tax-free income threshold being increased will be a huge benefit for single family member households, and maybe even part-time workers, and even contract workers, which will allow them to work more hours, and its good for the economy, as it will potentially have the effect of increased spending in the economy, even it just a little.
Those are all good ideas and maybe needed but to be fair are they only going to help Japanese households in the short-term or only a temporary situation and what about the long-term and can the budget be a long-term sustainable situation of the Japanese economy in the future?
But once again, this has been tried over and over by other Japanese Prime Ministers with short-term affects but it doesn't translate to long-term positives for the Japanese economy.
Only time will tell if the latest new budget is going to help Japanese households and what is really going to happen in the future as the new Prime Minister and the new Japanese government try to reduce inflation and make the lives of Japanese households and little better off.
Have a nice day!
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