I was impressed to hear of Japan's proposed $51 billion stimulus package, but then to read about the Minister for economic policy Kaoru Yosano saying, "We are already deep in debt, so to create effective demand for instant pleasure would not be wise."
A slightly crazy Japanese policymaker from the Financial Times:
Kaoru Yosano, Japan’s minister for economic policy, has attacked calls for higher public spending.
He said Japan could not afford to add to its gross public debt, already about 180 per cent of national output, the highest in the advanced world.
Mr Yosano told the Financial Times in an interview: “We are already deep in debt, so to create effective demand for instant pleasure would not be wise.”
The minister said the government was unlikely to find many worthy targets for stimulative funding.
Constructing more public buildings – a favoured economy-boosting method in the past – would be “stupid” since maintenance costs would be a long-term burden, he said.
Faster expansion of the national Shinkansen high-speed rail network looked like a decent option, the economy minister said.
But policymakers in the ruling LDP party are not keen.
“We don’t have very good public works any more,” Mr Yosano said.
Some may disagree. The government has been attacked for cutting incentives for private spending in technologies such as solar power that would help protect the environment and reduce greenhouse gas emissions.
Direct government investment could, for example, play a vital role in building the recharging infrastructure needed to make electric vehicles more commercially viable. Mr Yosano did urge more spending on unemployment benefit, saying the government could mitigate the social effects of recession by, for example, doubling to a year the period that benefits could be paid.
Conditions were unlikely to become as bad as 1929. “These difficulties are not impossible,” he said.
Teizo Taya, special counsellor to the Daiwa Research Institute, said Japan had learnt that deficit spending was dangerous, and western economies would find that running big deficits could lead to uncontrollable inflation.
“We are not that stupid. We are not that desperate in Japan,” he said.
However, Shijuro Ogata, a former Bank of Japan official, attacked what he said was Japan’s overly passive response.
“These people are so fatalistic. They are always talking about the world’s impact on Japan, not Japan’s impact on the world."
He said Japan could not be a locomotive for the global economy but it could take bolder emergency fiscal measures and try to stimulate personal consumption in the medium term. Rebecca Wilder