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Japan Agrees Record 92.4 Trillion Yen Draft Budget

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http://www.bbc.co.uk/news/business-12074304

The Japanese government has approved a record level of spending of 92.4 trillion yen ($1.1tn; £711bn) for the next financial year.

The cabinet agreed the draft budget, which must still be approved by parliament before 31 March.

Japan's economy has suffered from deflation, a high yen that hurts exports, weak domestic demand and poor consumer confidence.

The budget is aimed at boosting the economy, but adds to public debt.

And some analysts have said the programme was unlikely to offer a big economic boost.

Reined in

Debt-servicing costs and social security spending making up about 55% of the budget.

Aid for local authorities accounts for another 18.2% of the budget. The remainder of the spending is split among defence, public works projects, education and technology.

This plan is brilliant, anyone know what the breakdown of debt servicing costs is? How much of the budget is purely down to servicing the already huge debt Japan is in.

Still I'm sure this time the Japanese will turn the corner and all this govt spending will produce real economic growth and increase GDP. I mean it's not like it's going to fail...

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http://www.xe.com/news/2010/12/24/1605105.htm?utm_source=RSS&utm_medium=TL&utm_content=NOGEO&utm_campaign=News_RSS_Art3

Tax revenues are seen rising to about 41 trillion yen, falling short of new debt issuance despite an increase of about 4 trillion yen compared with this year's initial budget figure as the economy recovered from a deep recession.

To balance the 2011/12 budget, the cash-strapped government is expected to scrape together about 7 trillion yen of non-tax revenues, the bulk of it by raiding cash reserves from special accounts and administrative agencies.

Government officials say non-tax revenues are only a near-term solution and it will be even harder to compile budgets from next year onwards without raising the sales tax or making deep spending cuts to tackle rising welfare costs due to fast-ageing society.

The government says it will seek to implement comprehensive tax reform -- coded wording for a sales tax hike -- in fiscal 2012/13, but it could face stiff resistance from ruling party lawmakers wary of alienating voters.

http://uk.news.yahoo.com/22/20101224/tbs-uk-japan-economy-budget-factbox-4210405.html

WELFARE SPENDING: 28.7 TRLN YEN

The government plans to spend a record 28.7 trillion yen on welfare, up 5.3 percent from the previous year due to the ageing population and its pledge to pay allowances to families with children as a step to counter falling birthrates.

As pension payments steadily increase, the government needed to come up with emergency funding of 2.5 trillion yen to continue shouldering 50 percent of the payments and dipped into reserves in special accounts, which it calls "non-tax revenues."

But the reserves become applicable only if the government is able to pass related bills in the parliament next year and this may prove tough as opposition parties are likely to try to block their passage.

The savings in special accounts are also drying up, putting more pressure on the government to seek a hike in the 5 percent consumption tax as the society ages, but it fears proposing such a rise would alienate voters.

....

DEBT SERVICING COSTS

Interest payments and retiring debt would cost 21.5 trillion yen in the next fiscal year, or 23.3 percent of the overall budget, a 4.4 percent increase from the previous year.

Japanese yields are low when compared with the United States and Europe, but they have been rising recently and this could affect next fiscal year's debt servicing costs, according to Finance Minister Yoshihiko Noda.

So 23% of govt spending is on servicing debt and thus providing zero services to the public, and if borrowing costs increase Japan is going to be toast. Default looming?

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The bit I don't get is why the Yen is so strong.

If a country is technicaly bankrupt and will in time struggle to even service its debt, how can the currency remain strong? It almost gives hope for the £.

Can someone who knows enlighten?

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The bit I don't get is why the Yen is so strong.

If a country is technicaly bankrupt and will in time struggle to even service its debt, how can the currency remain strong? It almost gives hope for the £.

Can someone who knows enlighten?

It's even stronger if it was not for the export led yen suppression (via constant money printing).

But effectively Japan like most asian nations has incredible savings rates, people by their 30s have often tucked away £60-£120K (equiv) because pensions are terrible in Japan and there is something called the empty 5 years. People are 'retired' at 60 or so, but they cannot claim any state pension so many save for this event. This means that Japan rarely if ever has to turn to the external open market to buy its bonds and debt as they have so much they buy from their selves. This will change in 2011 and 12 as they've run up such an insane debt that the internal savings have run out.

Additionally welfare there is appaulling, live in a box city? Live under a bridge? Live in a shanty town (there are lots of shanty towns in Japan) live in an internet cafe? You still don't qualify for any welfare at all.

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Sounds weak to me. The payments to families is a small step in the right direction..

Add a few hundred billion US dollars worth over last year and get things rolling. Printing and borrowing to fund the extra. As for the high debt to gdp ratio, for Japan its more a function of high savings rate and massive private sector deleveraging. But the real way to bring that down, is to borrow and print wildly and get some real inflation going. Deflation like the last few years will actually make that debt bigger and harder to deal with.

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It's even stronger if it was not for the export led yen suppression (via constant money printing).

But effectively Japan like most asian nations has incredible savings rates, people by their 30s have often tucked away £60-£120K (equiv) because pensions are terrible in Japan and there is something called the empty 5 years. People are 'retired' at 60 or so, but they cannot claim any state pension so many save for this event. This means that Japan rarely if ever has to turn to the external open market to buy its bonds and debt as they have so much they buy from their selves. This will change in 2011 and 12 as they've run up such an insane debt that the internal savings have run out.

Additionally welfare there is appaulling, live in a box city? Live under a bridge? Live in a shanty town (there are lots of shanty towns in Japan) live in an internet cafe? You still don't qualify for any welfare at all.

Japan needs some serious huge welfare spending. But culturally they can't bring themselves to give people money unless they do productive work. This cultural trait is one factor that made them great, but in my opinion is really handicapping them in this new world we are entering(and Japan is already in).

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Additionally welfare there is appaulling, live in a box city? Live under a bridge? Live in a shanty town (there are lots of shanty towns in Japan) live in an internet cafe? You still don't qualify for any welfare at all.

So they don't give welfare and they still in massive debt?

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Japan is a good example of a situation where social culture fails to change when the economic reality changes. I heard a radio report about agencies over there where you can hire actors to play the roles of work colleges, friends and family members for social events.

All this is about saving face and trying to preserve the illusion that the 'salary man' culture of social inclusion still thrives, when in fact it's crumbling away. The fabled savings of Japan are also not what they were because their ageing population is now cashing in it's chips to live on.

Right at the end of the radio report they interviewed a guy who had hired actors to play his family and friends at his wedding- mainly to save the face of the brides family. The reporter asked him finally how he knew that the brides family were not also actors hired to play their roles!!!!

This is not a healthy society.

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So they don't give welfare and they still in massive debt?

Yep, Japan may not have much social welfare but they spend much money on other things.

Firstly they have been bailing out their zombie banks since the 1990s.

Secondly they have been bailing out the construction industry for decades too ($7trillion) quite literally there are bridges to nowhere, where they were uneeded and unwanted. Hamada village for example, 61000 people live there and they built a bridge costing millions!

Bigger examples exist Kansai airport for example, in 1994 to replace Osaka airport. They did not do a Hong Kong, HK airport is actually a mountain which was pushed into the sea. No no, they reclaimed the land from Osaka bay and built an airport on it. There was already an airport nearby Osaka-Itami. 2004 they decided to build Kobe airport 26 miles away. 2007 they reclaimed MORE land to build a 2nd runway at Kansai airport. You might think uh thats ok, its infrastructure it'll create jobs. But we're talking about Japan here, whereby the Shinkansen bullet train can get you from city to city at 200mph without security checks. So if you live in Osaka? You can get the train to Narita (Tokyo) in 90 minutes and fly from there instead. Or if it is a domestic flight simply not have flown at all.

Thirdly bailing out private companies. JAL IIRC has been bailed out three times in the past decade. There was also talk of Toyota being bailed out with suspiciously cheap government loans, I do not know if this happened or not.

Forthly you've got a growing issue with China, i.e. the top of the line stuff is made in Japan the rest is made in China or Thailand. EG ZX10Rs and ZZR1400s are made in Japan, everything else of the kawaka range is made in Thailand. This costs jobs + taxes.

Edited by ken_ichikawa

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Japan is a good example of a situation where social culture fails to change when the economic reality changes. I heard a radio report about agencies over there where you can hire actors to play the roles of work colleges, friends and family members for social events.

All this is about saving face and trying to preserve the illusion that the 'salary man' culture of social inclusion still thrives, when in fact it's crumbling away. The fabled savings of Japan are also not what they were because their ageing population is now cashing in it's chips to live on.

Right at the end of the radio report they interviewed a guy who had hired actors to play his family and friends at his wedding- mainly to save the face of the brides family. The reporter asked him finally how he knew that the brides family were not also actors hired to play their roles!!!!

This is not a healthy society.

WEIRD!

Anyone seen Akira, the vintage anime film? Japan will be like that.

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  • 312 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% +
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      • Even
      • up 2.5%
      • up 5%



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