Economics

日本的经济窘境

Apr 29, 2016 Martin Feldstein

发自剑桥——日本经济一个是繁荣与失败的矛盾混合体。而且在很大程度上，正是它的繁荣使得其失败变成了一个棘手的难题。

对于那些造访东京的人来说，日本的富裕是显而易见的。生活水平相当高，2015年的人均收入（按购买力平价计算）达3.8万美元，接近英法两国4.1万美元的平均值。失业率为3.3％，大大低于美国的5％和欧元区的10％。

但日本的经济却已陷入通缩，三月份的消费者价格指数比去年同期更低，而实际GDP则一路下行。虽然借贷成本已经接近零，但财政赤字却相当于当前GDP的7％，政府负债额则超过GDP的230％。人口和劳动力双双萎缩，意味着未来的负债率还将走高。

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Martin Feldstein

Writing for PS since 2008
130 Commentaries

Martin Feldstein was Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research. He chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush's Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama's Economic Recovery Advisory Board. He was also on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

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Alexandros Aslanidis Jun 25, 2016

Just what Project-Syndicate needed, yet another hawk.

Well, Mr Hotshot Economist, I've got a better idea: controlled trade and capital flows, accompanied by central-bank financed government deficits.

Then when the world turns back to normal, we can revert to normal (i.e. hawkish) policies.
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M A J Jeyaseelan May 3, 2016

It is indeed very tragic and sad that almost every economy in the world is besieged by problems of sorts in spite of the significant technological progress. It has been the result of utter mismanagement of economies by politicians of every and their coterie of economists who have no understanding of what economics is all about. But for the technological progress, there could have been only untold miseries all around.

Take it from me today and read it after 10 years or 50 years later, economic health of most countries would only deteriorate. And the root cause for the perpetual problems will the very same rotten economic theories that have been ruling the roost and from which there seems no respite.

Monetary interventions aimed at pepping up aggregate demand can only distort economies. There is hardly any economist out there who exhibits even a modicum of understanding of how the 'real' economy functions.

What is happening in economics is no different from what is happening in politics. We vote out one party and bring back the same old party which was voted out previously. In the same way, economic theories that have failed time and time again are resurrected when the current set of theories fail.

The real problems is with the economic science itself. Economics as it stands today will never be able to solve any of the economic problems because its theories are far removed from ground realities.
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Peter Burgess May 2, 2016

I have followed global economics for something more than 50 years, and do not understand why there is such a preoccupation with economic growth. I understand that it is easier for corporate profits to grow in a growing economy, but corporate profits are not the most important indicator of socio-enviro-economic system health. Rather, the health and prosperity of the population is more important, but pretty much ignored by the big name economists of the modern era. The preoccupation with GDP growth and modest inflation as the optimum economic performance may suit those with wealth, but more than 99% of the world's population has little wealth and their quality of life should be the dominant metric. When this thinking is applied to Japan, the economic state of Japan and its people is in a far better state than most other countries in the world. Peter Burgess ... TureValueMetrics.org
- KC LOH May 3, 2016
  
  Well said.
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Procyon Mukherjee May 2, 2016

This is similar to the 'problems of prosperity' that Buffet mentioned in the annual share holder meeting. The earliest businesses needed way too little capital and now they need tons of capital and that impacts compounding of growth in equity. When that happens in an economy we edge towards deflation.
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Richard Solomon May 1, 2016

Abe's fiscal stimuli and structural reforms have been empty gestures, at best. If he is serious about getting the economy going again, he needs to take concerted and ongoing action. Eg, eliminate the tax breaks for married women with children to stay home. Lower corporate tax rates for those companies which hire and promote substantially more women into permanent, full time jobs. Build many more daycare facilities so married women can ensure that their preschool aged shildren will be cared for when they work. Invest and spend much more money on developing renewable fuels as a source of electricity production in the country. The BOJ cannot do much more than it has. It is up to Abe to pick up and carry the ball!
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John Doyle May 1, 2016

This business about the Government Debt is all false. It's very far from being a problem for Japan.
"Government debt" is a misnomer. It's like saying your savings account at your bank is a bank debt. Not to you it isn't. And not to Japan is it either.
Governments sell bonds to investors and then just sit on the money, paying interest. At maturity the transaction is reversed and the investors get their money back, the same money as invested. The government has no need to spend investors' money. It has access to all it needs at no cost.
So government debt is s sign of wealth, not the contrary.

And why would one want to reduce the budget deficit? The fiscal space, the Output gap is huge. There is tons of room to move. Instead we see someone applying leeches to cure enemia!
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John Brian Shannon Apr 29, 2016

Hi Martin,

As every economist knows, if the fundamentals of an economy are sound, any conceivable shock to the economy will quickly dissipate and normal economic flows will resume.

Unfortunately, Prime Minister Shinzo Abe inherited an economy where the fundamentals were not sound, and more than one parameter was out of alignment. Which is a different way of saying the Japanese economy was designed to fail -- and to do so on his watch.

The unexpected shock of the Fukushima-Daiichi meltdown and the subsequent shuttering of Japan's entire nuclear power plant fleet didn't help. Some 29% of Japan's electricity was produced by those (cheap to operate) nuclear power plants. Many of those n-plants are now undergoing decommissioning, or are still offline.

Mr. Abe's Three Arrow policies were necessary, timely, and for what they are, effective. In retrospect, there was no other way for Japan to proceed. The country's economy would have imploded had the Prime Minister not acted so appropriately.

However, I suspect that even Shinzo Abe knew that it would take more than Three Arrows to reset Japan's economy. But they are a great start to putting Japan's economic fundamentals where they need to be.

It will take two more 'Arrows' in order to return Japan to a balanced state -- the 'steady state' where a fundamentally sound economy can withstand moderate political or economic shocks -- whether external or internal.

Arrow #4 must surely be an inheritance tax of some significance. Japan's diminishing population pyramid means that domestic demand will continue to taper for many years.

With falling tax revenue due to a shrinking population, the government needs money to operate -- providing the same level of infrastructure to a falling population. In Japan's case (similar case in Germany) a moderate-to-high inheritance tax will allow the government to maintain spending in the face of falling income tax and other tax revenues.

Arrow #5 must be raising corporate taxes. Consumers will not accept the twin assault of higher inheritance taxes AND yet another VAT increase.

That will only result in widespread public disaffection and the result will be Prime Minister Abe being voted out of office after doing so much good work.

If consumers (voters) are expected to shoulder a higher tax burden, then corporations must also pay their fair share. If that means that corporate dividends for wealthy investors are a few cents lower, well, that's just too bad. (You understand the Japanese voter sentiment that I'm trying to explain in polite terms?)
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By raising inheritance taxes and corporate taxes, the government should be able to return to a zero-deficit condition within two years.

At that point the Japanese economy will again be in a 'steady state' where it can flourish as a fully functioning economy.

A final note; Even though I'm a fan of massive stimulus:
At the early onset of economic downturns massive government intervention works very well, but continuing to massively stimulate an economy for longer than 5 years (at the most) results in reaching a point of diminishing returns by the 6th or 7th year.

That is why, in order for government intervention to be most effective, it must be massive, it must be early, and it must continue for 5 years or less. (Less is better)

Other economic levers must also be applied. We can't expect stimulus to solve fundamental problems with the economy.

If the economy hasn't got it's fundamentals in order, massive stimulus only warps the equation -- but in fairness -- it gives the country's leaders a few short years to get those fundamentals in order.
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Therefore, my prescription for Japan's ailing economy is 'take two more arrows' and get that deficit down to zero, and do all of it within 2-3 years.

Prime Minister Shinzo Abe has the credibility and the political energy to get it done. Leaving it for the next Japanese Prime Minister isn't really an option as the economy will continue to deteriorate in the meantime, now that the point of diminishing returns in regards to massive stimulus has, or is about to be reached.

Thank you again for publicly posting your thoughts at Project Syndicate!

As always, very best regards, JBS
- John Brian Shannon Apr 30, 2016
  
  I've re-written my comment and posted it at:
  https://johnbrianshannon.com/2016/04/29/3-out-of-5-arrows-japans-abenomics/
  
  If you would like to read it.
  Cheers, JBS
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Marc Laventurier Apr 29, 2016

Capitalism as Kabuki. In the States, it's a big-sky morality play wherein the 'native americans' and other livestock will suffer the tragedy implicit in the farce of pretending that immediate private profits constitute growth that will cover the public debt forming a narrowing canyon stretching into the sunset.
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Steve Hurst Apr 29, 2016

Why is the near automatic answer to recommend raising taxation the solution to growth problems when disposable income is the issue
- Robert O'Regan Apr 29, 2016
  
  It is a liquidity trap that has no simple solution, like raising taxes. Fiscal policy is best; international
  factors are working against Abe.
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