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Japan Considers Shifting Money To The Young

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http://business.timesonline.co.uk/tol/business/economics/article7128872.ece

The Japanese Government is considering a radical rebalancing of tax law that could siphon trillions of yen from the savings of the elderly into the freer-spending wallets of the young, The Times has learnt.

The plans come amid rising fears that, with the worst fiscal position of all developed nations, Japan may be teetering towards the brink of its own debt crisis.

The new proposal, which would involve inheritance tax being raised significantly higher and the gift tax slashed to about half its present levels, will be included in the ruling Democratic Party of Japan’s manifesto when it is published this month.

The idea is to persuade older Japanese, who sit on vast savings, to pass their money on to their children now, rather than waiting to leave it to them in a will. The younger recipients, runs the theory, will spend more and boost the economy.

The plan is among a raft of increasingly desperate measures with which the eight-month-old Government of Yukio Hatoyama hopes to prevent the world’s second-largest economy plunging into inexorable, long-term decline.

Japan is beset by a host of structural and fiscal horrors that some bearish observers believe could, given the right trigger, culminate in a Greek-style sovereign debt debacle.

Last Friday the International Monetary Fund predicted that Japan’s gross debt-to-GDP ratio would rise to 250 per cent over the next five years.

What an excellent plan a one time huge fiscal boost to try and get rid of savings, and once the money is gone what then?

Japan appears to be in the throws of a death spiral of debt, the prudent it appears will be sacrificed to the alter of consumerism and bank bailouts.

Coming to a country near you?

In fact they could borrow even more money into existence against the future value of assets when the person dies, house prices only ever go up....

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http://business.time...icle7128872.ece

What an excellent plan a one time huge fiscal boost to try and get rid of savings, and once the money is gone what then?

Japan appears to be in the throws of a death spiral of debt, the prudent it appears will be sacrificed to the alter of consumerism and bank bailouts.

Coming to a country near you?

In fact they could borrow even more money into existence against the future value of assets when the person dies, house prices only ever go up....

The idea that Japan could suffer a Greek style debt crisis is a little bit fanciful.

Have you had a look at Japan's trade surplus lately? They are high value manufacturers to the world.

Greece on the other hand are rather workshy overweight greasers needing a shave.

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http://e.nikkei.com/e/fr/tnks/Nni20100510D10JFA20.htm

TOKYO (Nikkei)--Japan's fiscal health continued to deteriorate last fiscal year, with outstanding central government bonds, borrowings and financing bills ballooning 36.42 trillion yen on the year to a record 882.92 trillion yen as of March 31, according to Ministry of Finance data released Monday.

A large percentage of Japanese government bonds are owned by domestic institutional investors with a penchant for long-term investment, thereby lessening the possibility of the instruments facing a sudden sell-off. But Japan's soaring debt continues to fuel calls for action to quickly rebuild the government's fiscal health.

The MOF releases the central government debt numbers every quarter. The latest sharp increase was the result of 53.5 trillion yen in new JGB issuances in fiscal 2009 to fund economic stimulus measures and to offset falling tax revenue amid the turmoil from Lehman Brothers Holdings Co.'s collapse. Based on population estimates as of April, the central government debt burden totals roughly 6.93 million yen per capita. By contrast, the per capita figure for financially troubled Greece is an estimated 3 million yen or so, including local bonds.

Japan is scheduled to float 44.3 trillion yen in new government bonds to offset funding shortages for new policy measures in the fiscal 2010 budget. The MOF predicts Japan's debt could hit 973 trillion yen by the end of fiscal 2010.

It appears that a surplus still doesn't stop the govt from borrowing money.

Trade surpluses clearly aren't creating tax revenues.

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I think it's a great idea. What's the point of sitting on cash savings. The only winners are the banks who shaft you for a miserly rate.

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http://www.thesunshinereport.net/marksunshine/?p=572

According to Ambrose Evans-Pritchard Japan is quickly turning into developed world’s sickest economy and could soon tip into an uncontrolled downward spiral. Evans-Pritchard reported last week in the Telegraph that Japan is reaching the point of no return where it won’t be able to meet its obligations and could enter a debt death spiral.

While Evans-Pritchard is one of my favorite writers, at the end of the article he comes to the wrong conclusion about what the West should learn from Japan. Evans-Pritchard suggests that too much government spending resulting in too much debt is the root cause of Japan’s problems and that the West needs to take notice and get government spending under control. While Evans-Pritchard is correct that Japan’s debt habit is unsustainable, the country’s debt problems are the result of its population imploding and the fuse finally burning out on its demographic time bomb. The Land of the Rising Sun is in trouble because it suffers from an insular society that discourages immigration and implicitly encourages low birth rates. For the last 50 Japan has been slowly committing demographic seppuku and now the inevitable is taking place, i.e., Japan’s population is crossed the tipping point so that its work force is both relatively old and shrinking and as a nation Japan can’t sustain its standard of living.

It shouldn’t be a surprise to anyone that Japan is facing deflation, falling domestic demand, stagnant to shrinking GDP and, as of recently, a low national savings rate. They are all the result of Japan’s bad demographics.

Virtually all economics students learn that when the work force of a nation shrinks it is difficult if not impossible to sustain economic growth and a vibrant economy. Also, retirees tend to consume less than families that are raising children and as each generation ages towards retirement it tends to consume less and less causing domestic demand to shrink. Aging populations also have low savings rates because most retirees continue to spend (particularly on healthcare) but stop working and cash out of their retirement nest eggs to live.

If the Japanese economy keeps on tracking demographic models, its problems will worsen until eventually a there will be an unsolvable crisis. There is inevitability that Japan will continue to decline and only radical social reform will change the outcome.

The lesson that the U.S., EU and Great Britain needs to learn from Japan is that every country’s population is the feedstock for its economy and if we don’t take care to make sure our population is dynamic, healthy and growing sooner or later bad economic things will happen. In Japan’s case, large structural deficits are the byproduct of bad demographics and not the cause of its problems.

Again I would contend that Japan has serious problems, it's running out of workers to meet current service costs of it's debts.

Japan isn't Greece, it has different problems relating to the debt.

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What an excellent plan a one time huge fiscal boost to try and get rid of savings, and once the money is gone what then?

Assuming it isn't all spent on imported goods, the money will be recycled around in the economy.

The plan wouldn't work here though as our old people aren't saving money to pass onto their children and grandchildren in their will, they are spending it, along with their childrens and grandchildrens wages for the next 20 years.

My home is my pension.

My home is my pension.

My home is my pension.

I want to keep my home, my children should pay me a pension, and a bit extra so I can afford to heat my massive home.

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http://caps.fool.com/Blogs/ViewPost.aspx?bpid=266896&t=01001019292467236494

Despite all of the euphoria surrounding the recent political party change in Japan, Barron's published an extremely bearish article on Japan in this week's issue. It contained some good data, including the following items:

- Japan's gross national debt now equals 217% of its GDP, compared with 81.2% for the United States and an average of 72.5% for the G-20 nations.

- The UN median forecast estimates that Japan's population will fall from its current 127 million to only 101.6 million by the year 2050 (the same forecast has the U.S. population rising from 317 million to 404 million during that period).

- Japan itself is predicting that the number of Japanese citizens of prime working age (15-64) will fall from 83 million in 2007 to 49 million in 2050.

- At the same time, the number of older, retired workers that are dependent upon the working generation to fund their pensions, etc... will rise from 27.5 million to 38 million. If this forecast is correct, the ratio of elderly to workers would rise from its current 33 per 100 to 77 per 100. Ouch.

I do not currently have a single Japanese company in my portfolio. With the U.S. consumer retrenching, the eternally weak Japanese consumer, and demographic headwinds in both countries (the latter's being much worse than the former's) I'm glad that I do not have any exposure there. I probably wouldn't shy away from investing in a Japanese company, but it would have to be priced extremely attractively for me to pull the trigger on it.

If the US stops buying how will Japan service it's debts?

They need to sell an awful lot of goods to make up the shortfall in population.

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hyperinflation agogo

If the Japanese go down this route I would agree that this will more than likely be the outcome. The Japanese didn't spend the stimulus money they saved it, a wall of inflation could be released.

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And that's why you're supposed to kill zombie banks

Japan led the way in keeping them alive, propping up asset prices and forcing mums into a baby strike to stop their babies being born into intergenerational mortgages and debt serfdom

Who wants to see their kids grow up in a society like that?

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I think it's a great idea. What's the point of sitting on cash savings. The only winners are the banks who shaft you for a miserly rate.

Japanese people keep enormous savings and are quite candid about this, my Japanese friends have about 67K and they are 37 and 38 years old.

The thing is they save this money for what they call the dead period, Japanese people usually retire at 60-65 when they do choose to retire, the government shakes them out of their savings tree by forcing them to live a period of 5 years before they can touch their pensions, subject to various arrangements i.e. annuities they buy.

So most of them tend to save for this period due to the phenominal cost of living in Japan, or they pretend to be Koreans and take a boat to Busan and live in one of the small villages in Korea just outside Busan. The living is almost identical, bath houses, taking off of shoes, high tech everything even the food is similar but with less rice and more veg. As the cost of living in Korea is a hell of a lot lower.

Many people do not like this option as there is still huge amounts of hatered to the Japanese in Korea, in Korea for example they won't buy anything made in Japan, bar the odd super sports bike you just can't get in Korea. Probably due to WWII with state sactioned rape in the commfort houses, and the general rape of Korea as a colony, and enslaving the people for centuries before WWII.

And to add insult to injury Japan engages in revisionista history which is problematic because people who were raped and exploited are still alive much like the biological weapons used against Chinese peasants (anthorax spores, and chemical weapons). Japanese history taught in schools denies any of that stuff happened.

So most save like crazy so they can stay in Japan and not get harrassed by nationalistic Koreans.

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A good idea.

My wife is Japanese and her parents are both 75.

Btw, the gift tax was only on gifts over 11 million Yen (around 80,000 Gbp) per year the last I heard.

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What an excellent plan a one time huge fiscal boost to try and get rid of savings, and once the money is gone what then?

What a weird way of thinking you have.

Money doesn't disappear, especially in a country which has a positive foreign trade balance. Money that's stashed away is a drain on the economy, money needs to circulate to fulfill it's purpose.

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hyperinflation agogo

In Japan, you must be joking! Even when the government was giving free money to the people to revitalize the economy, it failed since the Japanese stashed most of it away instead of spending it.

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The Japanese Government is considering a radical rebalancing of tax law that could siphon trillions of yen from the savings of the elderly into the freer-spending wallets of the young, The Times has learnt.

"The Times has learnt" :lol:

Yes they'll likely be "siphoning" off the life time savings of the elderly but what's the betting that it's actually siphoned off towards the free-spending wallets of the, wait for it, bankers and politicians.

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What a weird way of thinking you have.

Money doesn't disappear, especially in a country which has a positive foreign trade balance. Money that's stashed away is a drain on the economy, money needs to circulate to fulfill it's purpose.

As we are spending their money, just whose money will we be spending?

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This new government in Japan came in with a lot of excitement.. finally a change of government and some new faces who stated they wanted to help the Japanese economy by driving consumer growth.. instead of export led growth as was the usual.

But quickly they seem to have forgotten about that plan and back to the old export led economy and building bridges to nowhere.

This plan is just pathetic and weak. The deflation will continue until real policy change happen.

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They need to make Japanese women have more babies. A lot more.

Maybe offer big handouts per kid?

Otherwise they'll end up having to import various sub-species to do the work, and we all know where that will end up - destroying the very things that made Japan do well.

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They need to make Japanese women have more babies. A lot more.

Maybe offer big handouts per kid?

Otherwise they'll end up having to import various sub-species to do the work, and we all know where that will end up - destroying the very things that made Japan do well.

Truth. Give £400 per kid per month. If thats not enough give £500 and so on. At some point women will break down and start having kids to keep up with the Jonesatayas

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The best thing that could happen to Japan would be a massive depreciation in the Yen. The high value of their currency is really making it difficult for their exporters (I work for one of them) especially when the Korean competition has seen the Won significantly devalued over the crunch.

regards

J

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The best thing that could happen to Japan would be a massive depreciation in the Yen. The high value of their currency is really making it difficult for their exporters (I work for one of them) especially when the Korean competition has seen the Won significantly devalued over the crunch.

regards

J

The best thing for Japan is surely to force their banks to value assets properly and, if they can't cope with the truth, let them go tits up. They have avoided doing that for the last 15 years and look at them now, still in the crap. The same applies to pretty much every other country with a massive deficit too, but will the ******* learn, no they won't. We'll get the continued "we don't want to end up like Japan, so let's make sure we spend a lot more than they did" approach.

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The best thing that could happen to Japan would be a massive depreciation in the Yen. The high value of their currency is really making it difficult for their exporters (I work for one of them) especially when the Korean competition has seen the Won significantly devalued over the crunch.

regards

J

Are you suggesting competitive devaluation? I think there are problems with this.

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the guys I spoke to in country reckon the current leader is as trustworthy as a black snake.

I'm sure that black snakes are quite trustworthy once you get to know them.

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  • 277 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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