Despite having the G7’s largest debt to GDP ratio, Japan Boots Military Spending to Record levels amid Chinese tensions.
Japan’s Prime Minister Shinzo Abe has signed off a record defense budget in the face of territorial disputes with China and North Korea’s nuclear and missile threats.
Spending on fighter jets and submarines are partly behind the increase to 5.13 trillion yen (£35.2bn, $43.6bn).
A separate coastguard budget will also be raised sharply.
The plans are part of a 97.5tn yen budget for the financial year starting 1 April 2017.
Japan’s parliament must still approve the budget, but if approved it would be the fifth consecutive rise in the defense budget.
A rising social security bill to fund the cost of services for an ageing population is already putting increasing pressure on the country’s economy, and the extra defense and coastguard spending will add to Japan’s debt.
Mike “Mish” Shedlock
Stuki Moi said:
Next up, enlistment! All males aged 88 to 90 must register and serve 2 years in the Coast Guard!
No refugees making it here, darnit! We’re gonna die at the hands of some malfunctioning Asimo screwing up our feeding tube. Not some bomb throwing gaijin one tenth our age!
Mish, What do you make of this :
Question – what should be done to fix it or is it just too late?
Old Guy said:
I think Japan sees the writing on the wall with its relations with the USA. Even though the USA continues to spend enormous money for the Navy and Air Force. Yes indeed it is stupid but we cannot protect Japan nor should we unless they are attacked.
This is one area Japan has not tried to inflate so off they go! It is indeed a crazy world we live in.
It’s a damn good thing that relationships between Japan and China have been peaceful for thousands of years. No bad blood there.
Thie time, China will prevail.
Jon Sellers said:
Sovereign debt doesn’t matter in Japan. It’s not really debt when you don’t have to raise taxes or sell assets to pay it. Inflation will only come when there is significant pressure on wages. And that is hard to do when you are next door to over a billion Chinese.
We’ll all get inflation we don’t want. Interest rates rising sharply is going to kill the global ‘recovery’ and bury the over-indebted. This will not end well.
Is there a more efficient means of burning money inside your own economy that defense spending? People need jobs and the domestic manufacture of weapons and maintenance of a standing army while beating the drums of nationalism is likely a very good means of stimulating a dying economy. Unfortunately it comes with great and seemingly inevitable risks.
I do support a string military but when it becomes the engine of an economy, it ends badly.
I think Trump should give them the Abe (ahbay) Lincoln aircraft carrier. They could train Filipinos to be the ship’s crew – save on labour cost.
If it can’t be fixed how will the debt bomb fail.
Where first, who last, when, by what route?
Does anyone have a map?
Tony Bennett said:
This post is incomplete.
Any talk of Japan spending requires Krugman to weigh in (with nonsense) …
This isn’t going to end well. I think the people who might be actually qualified to be president knew this and bowed out. The last time the world saw so much “peace” the result was World War One.
Todd Fisher said:
Why is everyone crowing about the US debt hitting $20 trillion? Just look at Japan! Their debt burden is almost twice ours and they haven’t imploded, or suffered hyperinflation. The US debt is easily headed to $40 trillion in 8 years, and nothing will happen. Let the good times continue to roll. Krugman is right, debt doesn’t matter!
Tony Bennett said:
Good times roll?
Japan has had 7 recessions since 1990.
Jon Sellers said:
Private sector debt is a problem. Not public sector debt in a country that can borrow in its own currency.
I attended a Trump campaign rally and listened to him speak. He made it very clear that under his Presidency that other allied nations throughout the world (eg..Japan) would pay though the nose for US defense services. No more free rides. Japan can apparently read the writing in the wall. Why should the US taxpayers be forced to foot the lion’s share of the bill to defend other sovereign nations? Pay up or defend yourselves.
Maximus Minimus said:
Japan is at a crossroad; on the one hand, it would like to pursue a more independent foreign policy, on the other hand, the rise of nuclear armed China limits that option. The time is not Japan’s friend.
Read another insight @ http://blogs.rediff.com/mkbhadrakumar/2016/12/21/abe-proves-no-match-for-putin-in-deal-making
Japan is a surplus (trade) country. They (the Japanese) finance 100% of their government deficit.
When (not if) they eventually become a deficit (trade) country, foreigners will have a say in how their government deficit gets financed (hint: at much higher interest rates).
Keep an eye on Japan’s balance of payments. When it flips to negative, the trouble will start – and probably escalate quickly.
Maybe they are following Krugman’s advice to prepare for war with space aliens.
Japan still has most of their nuclear power offline and needs lots of fossil fuels to make electricity. The cheap price of oil the last 2 years saved them lots. If oil keeps going up to $80 or so then Japan’s balance of trade would be in trouble. The central bank is mostly buying up on long term government bonds at 0%, which is bubble territory for sure. If bonds crash the central bank’s assets can no longer buy back all the new yen they created. If you compare a 10 year bond in the USA to a 10 year bond in Japan and rates go up 1% in the USA but stay at 0% in Japan, then to stay equal present value the Yen sort of has to go down more than 10%. I have been thinking the Yen would be in trouble for about 4 years now, but it really seems like we are closer to this trouble than ever before. 🙂
The Chinese must be delighted. The arms race the Chinese have created just caused Japan to spend itself into a collapse much like what happened between the US and Soviets.
Fred Rogers said:
Just want to remind everyone: 30 years into a “successful” keynesian policy response, Japan’s economy is still in a “sheet hole”.
Also, the Fukashima nuclear plant is still under control. Nothing to see here, move along. Sorry, Japanese authorities cannot allow anyone back into the contaminated… ummm, I mean “under control” zone for about another 1000 years. Nothing to see, move along