Hatoyama Proposes Record Budget, Exacerbating Japan Debt Burden

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Michael Höhne's picture
Michael Höhne
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Hatoyama Proposes Record Budget, Exacerbating Japan Debt Burden

English: http://www.businessweek.com/news/2009-12-25/hatoyama-proposes-record-budget-exacerbating-japan-debt-burden.html

German: http://www.wiwo.de/politik-weltwirtschaft/japan-stellt-rekord-haushalt-vor-417854/

[quote]Dec. 26 (Bloomberg) -- Prime Minister Yukio Hatoyama unveiled a record budget of 92.3 trillion yen ($1 trillion) aimed at increasing the wealth of Japanese households and reducing the economy’s reliance on exports.

The proposal for the fiscal year that starts April 1, released yesterday in Tokyo, said the government will sell 44.3 trillion yen of new debt to help fund a revenue shortfall.[/quote]

Neither the English nor the German article explains what it means, so I thought I'll do. The budget of 92.3 trillion yen contains 44.3 trillion yen of new debt. That's 48% (fourty-eight percent).

[quote]The government estimates tax revenue will be around 37 trillion yen next year, the same as this year’s forecast. Gross domestic product will expand 1.4 percent in the period, the first expansion in three years, the government said.[/quote]

Again, neither the English nor the German article focuses on these numbers. If tax revenues are 37 trillion yen but new debt is 44.3 trillion, then for every yen received from taxes Japan needs 1.20 yens of new debt to finance their spendings. That's a staggering 120%.

The numbers are there in the articles, but the conclusions are not. I wonder who's the first to go down (US, Japan, Australia, Europe) or if they are working closely together for a final and global meltdown.

joemanc's picture
joemanc
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Re: Hatoyama Proposes Record Budget, Exacerbating Japan ...
Michael Höhne wrote:

  I wonder who's the first to go down (US, Japan, Australia, Europe) or if they are working closely together for a final and global meltdown.

This coordinated debt madness reminds me of the music jingle: Anything you can do I can do better. In a way, at least the USgov is not the only insane asylum in the world. Undecided

 

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nickbert
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Re: Hatoyama Proposes Record Budget, Exacerbating Japan ...

Perhaps this is all part of the 'check kiting' scheme that CM has alluded to in earlier reports, where central banks move the same money around and around to put on the appearance of business as normal.  You have to get more than one party to play along in order for it to work, and given how much the US has taken advantage of massive debt issuance it would be surprising if Japan DIDN'T do the same.  They are almost without a doubt involved in the game, so it makes sense in a twisted sort of way that they'd take advantage of the opportunity as well. 

- Nickbert

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guardia
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Re: Hatoyama Proposes Record Budget, Exacerbating Japan ...
nickbert wrote:

Perhaps this is all part of the 'check kiting' scheme that CM has alluded to in earlier reports, where central banks move the same money around and around to put on the appearance of business as normal.  You have to get more than one party to play along in order for it to work, and given how much the US has taken advantage of massive debt issuance it would be surprising if Japan DIDN'T do the same.  They are almost without a doubt involved in the game, so it makes sense in a twisted sort of way that they'd take advantage of the opportunity as well. 

I think it goes even further than that. Politically, they simply have no choice. You remember the 10 trillion yen they spat out a bit earlier last month? Well, the primary reason behind that was to lower the value of the yen... I know, I live here in Japan. The week the yen hiked to around 85 yen for US$1, you heard waves after waves of morons (politicians, company executives, etc.) complaining about the high yen (and also about deflation). You did _not_ hear anyone complaining about the lack of money... Hatoyama even said himself that morning of the "emergency meeting" something along these lines: "We will be holding an emergency meeting to figure out what to do about the strengthening yen and deflation". Next thing you know, there you had it in the evening: 10 brand spanking new trillion yen. "We want a low yen", he even said and the yen lost 2% right there.

(An interesting thing is that they rely on the fact that this will scare off FX traders, not the actual effect of the new money circulating around. So the prime minister simply has to say stuff like "we will do everything in our power to lower the yen", and bam voilà, lower yen the next morning, even if they don't actually do anything. And Japanese buy it, they think it's a good thing. Crazy world.)

Japan's problem is the same as China: Their economy is dependent on exports, and America's not buying anymore. They have two choices:

  1. Figure out how to become less reliant on exports, or
  2. Sink with America.

Unfortunately, they are trying to do both at the same time, and it won't work out.

Samuel

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