Spiritualism and austerity among Japanese politicians
Cheap spiritualism, without any effort to relieve the economic burden on the people, is apparently prevalent in political circles. A prime example was expressed in the LDP board meeting on April 13.
At a later press conference, Secretary General Toshihiro Nikai said, "We are committed to supporting the people's efforts to encourage and fight against the new coronavirus," and announced the return of a portion of the Diet member's annual salary. It is truly an example of spiritualism that makes fools of the people.
There was a similar movement during the Great East Japan Earthquake. Specifically, a special law was enacted to reduce parliamentarians' spending, and a portion of the spending has been used to fund reconstruction measures, and the cabinet of Naoto Kan has voluntarily returned ministerial salaries.
In doing so, this spiritualism led to the idea of raising taxes on reconstruction. The plan will come to fruition in the form of a law related to the integrated reform of social security and taxes enacted in 2012 by a three-party agreement between the Democratic Party of Japan, the Liberal Democratic Party, and Komeito.
Once again, Mr. Nikai called on the opposition parties to return the yearly fees. In the end, the Liberal Democratic Party and the Constitutional Democratic Party agreed to a 20% cut for one year, but it seems as if they are also calling for future tax increases.
If there is any attitude among the public that is pleased with this kind of spending cut by politicians, it would be better to reflect deeply. We only need to ask politicians to do a job that is properly commensurate with their annual expenses.
Will you be motivated by being told to work more than you did before while your salary is reduced? If you think that only politicians can do something that you can't do, you should be very congratulatory.
It is only because the soil on the people's side of the country is receptive to cheap spiritualism that statements like Mr. Nikai's come out. In short, it's frivolous populism .
Even if it was populism, it would be good if it improved the lives of the people. But the return of a politician's salary is nothing more than a political posture that does not lead to any improvement in the lives of the people.
The spread of the COVID-19 has exhausted and aggravated the lives of our people. The only way out of this situation is to implement appropriate economic measures. In other words, we need the government to pay up and defend our lives.
In Japan, however, the ill effects of the bureaucracy are so severe that the austerity ideology of the Ministry of Finance has been in full force during the crisis. The public must fight this Treasury "austerity disease" at the same time as COVID-19.
The Treasury's austerity sickness is stubborn. This is my guess, but it is not surprising that a political gimmick is already in the works to raise taxes.
A supplementary budget has been submitted with regard to these emergency economic measures. The additional spending will total about 16.8 trillion yen ($154 billion) , all of which will be raised through the issuance of government bonds.
If we issue additional government bonds now, the Bank of Japan will mostly absorb them through the private sector. Since the government and the Bank of Japan are integrated governments, they are, so to speak, only lending and borrowing within the same household.
If you look at the balance sheet of the integrated government, there will be just the right balance of assets and liabilities, and there will be no fear of a "fiscal crisis".Rather, the Bank of Japan has stated, even in its official opinion, that it can support the government if it develops an aggressive fiscal policy by issuing government bonds.
In the infectious period, economic measures to support people's livelihoods are taken. You don't lose your job when you don't have a job, and you don't go bankrupt when you don't have a customer. The best case scenario is that, once the infectious period is over, a V-shaped recovery will be achieved through more aggressive fiscal and monetary policy coordination. As a concrete measure, it would be desirable to provide 100,000 to 200,000 yen（＄934－＄1868） per capita and reduce the consumption tax rate to 8% with a combination of various support measures.
But as we all know, the current government has severely diminished the effectiveness of its policies with income limited benefits and the like. In addition, the Ministry of Finance may be trying to see the timing and switch to a tax hike.
Deputy Prime Minister and Finance Minister Taro Aso said at an April 13 meeting of the House of Representatives' administrative oversight committee on account settlements that he would not abandon his goal of returning to a primary balance surplus by fiscal 2025.Simply put, the primary balance indicates whether the policy spending at a given point in time is funded by the tax revenues at that point in time.
If there is a surplus, it is "tax revenue > expenditure"; if there is a deficit, it is the other way around. The current primary balance is a deficit.
In order to convert to a surplus, economic growth stabilization = tax revenue stabilization, tax increases, and administrative reforms can be considered. The prevailing policy of raising taxes is to raise the consumption tax rate, on which the Ministry of Finance relies heavily.
But there is no economic reason to turn the primary balance into a surplus in the first place. In a paper co-authored by Olivier Blanchard, former chief economist at the International Monetary Fund (IMF), and Takeshi Tashiro, a current executive at the Ministry of Economy, Trade and Industry (METI), titled "Fiscal Policy Options for Japan ," the authors of the paper pointed out the following
In the current Japanese environment, there is a strong case for continuing to run primary deficits, perhaps even to increase them and to accept a higher debt level. Primary deficits help sustain demand and output, alleviate the burden on monetary policy, and can increase future output. In short, the costs of primary deficits are small, and the costs and risks of high debt are low.
https://www.piie.com/system/files/documents/pb19-7.pdf
In short, Blanchard and Tashiro point out that it is desirable to increase the national debt, thereby allowing the government to aggressively fiscalize and achieve economic growth. As a result, he argued, a situation like fiscal ruin could also be avoided.
In this case, a primary balance surplus is not an objective in itself. Simply put, it's an unimportant indicator.
Of course, in Japan, which is facing a "COVID-19 crisis," a more aggressive fiscal policy is desired because the economy is worse than the situation pointed out by Blanchard and Tashiro. More and more, it doesn't matter whether the primary balance is in the surplus or not.
But Aso and the finance ministry are still fixated on turning the traditional 2025 primary balance into a surplus. That means they have only one goal in mind. It is a massive tax increase at the end of the infectious period, that is, in the not-too-distant future.
So there is no such thing as a consumption tax cut as a stimulus to the economy that the Ministry of Finance has in mind. Rather, it's a prime example of a policy of denial at all costs.
We don't know whether the big tax hike will be a "corona tax", a big consumption tax hike, or a flurry of various taxes. However, there is no doubt that the will of Japan's most nefarious organization, the Ministry of Finance, is at the root of Japan's poorly executed infectious economic measures and its plans to raise taxes even further.
The problem is that such austerity in the Ministry of Finance is supported by flimsy spiritualists like Mr. Nikai and stubborn "primary balance" believers like Mr. Aso. They are Japan's biggest obstacle.
HIdetomi Tanaka (Professor, Jobu University)
