Thanks again, Lord Keynes

Japan struggles with the stubborn refusal of its citizens to agree with the approved economic theories:
The world's third-largest economy contracted at an annualized rate of 7.1 percent in the April-June quarter, according to updated government figures Monday. The initial estimate released earlier this month said the economy contracted 6.8 percent. Business investment fell more than twice as much as first estimated.
The economy's contraction was expected after Japan increased its sales tax from 5 percent to 8 percent on April 1.
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Surveys show the public opposes a further tax increase, though increases are needed to counter ballooning public debt, which now is more than twice the size of the economy.
The revised data Monday show business investment fell more than twice as much as estimated before, or 5.1 percent, while private residential spending sank 10.4 percent in annual terms.
"Theoretically, there should be no impact from the consumption tax increase on corporate spending or long-term corporate planning, but a large number of Japanese corporations seemed to see a large impact from the hike on final demand," said Junko Nishioka, an economist at RBS Japan Securities in Tokyo.

3 comments:

E Hines said...

Theoretically, there should be no impact from the consumption tax increase on corporate spending or long-term corporate planning, but a large number of Japanese corporations seemed to see a large impact from the hike on final demand[.]

Nishioka, along with American Progressives and Democrats , misunderstand (to be generous) Keynes' position on tax--and spending--increases as revenue raisers and economy stimulators.

Keynes wanted these as temporary measures, especially in the context of deficit spending and debt accumulation; their value came from their shock effect. Even Keynes recognized the...suboptimality...of long-term such increases, deficits, and debt accumulation.

Japan has made these things permanent, as have...misguided...American politicians.

Eric Hines

Ymar Sakar said...

This is what happens when you adopt Western democracy and then the Western socialized welfare scheme. It doesn't quite work past its expiration date.

Some people in Japan seem to think what makes America Strong is the fiat currency and debt system. What they don't know is that the sub culture of America and Japan is the only thing responsible for innovation and technological breakthroughs.

Yu-Ain Gonnano said...

It's almost like consumers who now face higher prices buy less stuff and that when consumers buy less stuff corporate revenue goes down. And when corporate income goes down, they, in turn, buy less stuff.

Who the hell could have seen *that* coming?