After decades of foolishly fighting deflation, Japan is broke. Social Security now consumes a whopping 53% of government spending and that number will rise.
A government panel now says Doubling of Sales Tax Needed to Shore Up Finances.
Japan needs to more than double its 5 percent consumption tax to shore up the government’s finances given soaring debt and welfare costs, a member of Prime Minister Naoto Kan’s tax and social security panel said.
“I don’t think an increase to 10 percent is enough,” former Financial Services Minister Hakuo Yanagisawa said yesterday in an interview at his office in Tokyo. “Our discussions must be based on new realities
Concern over Japan’s rising debt, the largest in the developed world, prompted Standard & Poor’s to cut the country’s credit rating last week. Social security costs in Japan, the world’s most rapidly aging society, have risen more than 60 percent since 2000 and will account for 53 percent of government spending in the fiscal year beginning in April.
Raising the sales tax may have political consequences. Kan’s Democratic Party of Japan lost elections for the Upper House of parliament in July after he floated the idea of raising the levy. When the tax was last raised in 1997, the economy went into recession.
More than 60 percent of voters believe raising the tax is necessary while 35 percent disagree, according to a Yomiuri newspaper survey published Jan. 16. The paper polled 1,069 people on Jan. 14-15 and didn’t provide a margin of error.
60% Favor Tax Hike?
I was startled to see 60% in favor of a tax hike. However, my friend Mike “In Tokyo” Rogers explains:
“What a load of rubbish. I’m sure that survey was taken somewhere near Kokaigijido. That’s where all the government offices all are.
There’s no regular working or retired Japanese person in their right mind who agrees with a sales tax hike.“
Sales Tax Cut Proponents Win Landslide Victories
Those seeking evidence that Mike “In Tokyo” has it correct need only read Japan’s two-party system is collapsing
Tokyo – Landslide victories for independent candidates in local elections in central Japan earlier this month shocked the nation’s two major parties and revived public doubt about the nascent two-party system.
‘It is the beginning of the collapse of the two-party system,’ Minoru Morita, a veteran political analyst, said.
The independents, Hideaki Omura, and the Nagoya Mayor Takashi Kawamura, who campaigned for tax cuts, defeated candidates endorsed by the big parties in the Aichi gubernatorial election and the mayoral race.
For the DPJ, a first indication of things to come were the November municipal polls in Matsudo, a Tokyo suburb. Of the 11 candidates the party fielded, only two won.
Another crushing defeat seems almost inevitable in upcoming nationwide local elections in April.
In the latest Kyodo News agency opinion survey, 19.9 per cent of those polled supported Kan’s cabinet, down 12.3 points from mid-January, and 63.4 per cent disapproved of the cabinet, up 9.5 points.
Japan’s Debt Trap Has No Escape
As in the US, voters in Japan are fed up with taxes. However, Japanese revenues are not only running dry, but in reverse.
Proving that government stupidity has no upper bounds, Mike “In Tokyo” notes Japan Wasted $78 Billion on Global Warming Research in six years.
Given a 200% Debt-to-GDP ratio, the world’s worst aging demographics, and with Social Security consuming 53% of government spending, Japan is in a debt trap with no possible escape.
Japan’s debt crisis is rapidly coming to a head, and few are even watching.
Mike “Mish” Shedlock
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