The hiatus is getting widened

The budget for the next year was set to boost the public enterprise sector while the welfare section is stringently suppressed. The most part of the increased tax income will be used for the former sector and for the export business. The people seem to be intoxicated by this apparently generous expenditure. This pattern has been repeated under the LDPJ government
since 1990s. The public enterprise boosting has been like a drug. It has been proved to end in failure. It heightens the economy for a while followed by a much more recession. Together with the side effects of massive quantitative easing by BOJ and the risen sales tax, the economy will surely drop very soon. It may even crash the economy considering of the astronomical amount of national debt.

The school children receiving the public financial support for education is steadily increasing. Fiftenn percent of the whole school children, that is the record high, are paid for that support a couple of years ago. On the other hand, the recipients of the financial aid for the poverty is also steadily increasing and has reached record high last year. More than 2 million people are receiving this aid. The major companies, mostly of export sector, are told to be willing to increase pay. Only originally rich people could enjoy it. The hiatus between rich and poor is increasingly widened now.

The cause of apparent deflation in Japan is believed to be due to the derease of working population and the increase of aged. That is the decline in demand. The policy of the government is clearly against any trial to improve this decline. In addition, this widened hiatus in the society will make it unstable.

When will the people wake up from this intoxication?


  1. It is true that the population of Japan is aging, and the historic aversion to immigration and assimilation will make it very difficult for the country to avoid a sharp decrease in population since the decreasing birth rate simply does not support increasing population, or even stable population.

    But several studies support the government stimulus policy changes now underway in Japan. See the book "This Time It's Different,"

    (This Time Is Different
    Eight Centuries of Financial Folly
    Carmen M. Reinhart and Kenneth S. Rogoff
    Princeton Univ Press, 2009

    These two scholars studied every financial collapses for the past 800 years, and they conclude that wars and speculative bubbles result in nearly doubling the debt of any society. The only proven stimulus over time is to "prime the pump" with stimulus of some sort, including private or government investment as well as a devaluation (within some measures) of the currency to encourage exports and make manufacturing more competitive. I know this is controversial, but austerity has never been a successful "medicine." The stimulus must be applied in intelligent doses, with infrastructure and other job-creating measures, but overall a country cannot get out of trouble by cutting spending to balance a budget. It's a favorite fable but 800 years of history does not support this policy.

    1. Jim,

      Thanks for the interesting comment. I would look for this book. But I suspect the economy system has greatly changed for the past 8 centuries. Maybe, the authors took it for granted and proceeded their observation and consideration about the necessity of stimulating economy.

      In Japan at present, the problem is the lack or the decline of demand as you also pointed out. I won't deny it is necessary to take policies to stir demand aspect in the economy. But it seems they are just increasing the supply. It won't work out here now, I believe. The rich poor gap is being increased now. I am afraid it will make our society very unstable.