This weekly report will provide some insights into life for a westerner (me) who is working for an extended period at Kyoto University in Japan but who over the years of working here has increasingly began to understand the language and local cultural traditions.
I know I am venturing into the world shared by sociologists, cultural anthropologists, cultural historians, and economists in the current research that I am pursuing. The question is whether traditional Japanese values are compatible with a mainstream ideology that pursues ever increasing GDP growth as a goal, if not a reality. The current Japanese government is pursuing what they previously referred to as a ‘high pressure’ growth strategy and aim to end the decades of low GDP growth deflation which has become embedded in the psyche of the corporate and household sector. This strategy is running into severe constraints, not the least coming from the demographic shifts that will see the population shrink to around 105 million by 20250 (from 123 million currently). In past posts I have suggested that Japan represents an ideal model to demonstrate how a degrowth strategy would work to maintain essential material prosperity yet reduce the nation’s ecological footprint. I am now looking into whether the degrowth notion has roots in the traditional cultural values of the nation. This is my first report (Part 1) on that theme.
In this blog post, I am continuing my work on examining the constraints in the Japanese infrastructure sector that would reduce the effectiveness of the fiscal expansion that the current government is proposing as a strategy to kickstart the economy and lift productivity. One approach is to decompose employment changes in the sector into the demand-side and supply-side components, which helps us assess whether there is a shortage of spending or a shortage of workers. The data shows two unambiguous patterns. First, construction employment is driven strongly by government spending on infrastructure. When that wanes, activity plummets. Second, in recent years, the overwhelming reason employment in the sector is declining is due to a contraction of labour supply. Taken together, while it is a relatively straightforward path to stimulate the industry – increase public investment spending, the supply constraints make that approach difficult to implement. This will bear on the effectiveness and outcomes of the current fiscal expansion proposed by the Takaichi government in Japan.
This weekly report will provide some insights into life for a westerner (me) who is working for an extended period at Kyoto University in Japan but who over the years of working here has increasingly began to understand the language and local cultural traditions.
I am currently working on developing models that help evaluate the constraints on fiscal expansion in Japan arising from the ageing workforce in the construction sector. The current government under Ms. Takaichi is pursuing what they call a “responsible proactive fiscal policy” that aims to utilise large-scale public investment spending to crowd-in private investment expenditure and create a high-pressure economy, where productivity growth is enhanced. The strategy also involves significant fiscal reform – moving away from single-year fiscal cycles (obsessing about primary surpluses) to a long-term, multi-year spending plan that provides certainty to the non-government sector. The combined public-private investment blueprint proposes to spend ¥370 trillion in the period to 2040 across 17 strategic sectors. Most mainstream commentary is focused on the implications of the increase in public debt arising from the proposals (given that the government still unnecessarily matches net spending increases with debt issuance) for bond market yields and whether the government will run out of money. An irrelevant focus! However, the intent of the plan can be contested given the need to reduce the ecological footprint of all nations. But even if we ignore that issue, the practicalities of the proposal can be contested within a Modern Monetary Theory (MMT) framework based on resource availability.
This weekly report will provide some insights into life for a westerner (me) who is working for an extended period at Kyoto University in Japan but who over the years of working here has increasingly began to understand the language and local cultural traditions.
On September 22, 2026, a member of the Monetary Policy Board of the Reserve Bank of Australia (RBA) gave a speech – A Wage-price Spiral: What are the Chances? – at Melbourne University. The tenor of his presentation was that despite the constant recent claims about wages pressures emanating from a labour market that is too tight and driving the current inflationary episode, there was no evidence to support the claims. That is a position that I have been arguing for over the last several years in countering the mainstream narratives. But, interestingly, and shockingly, on the same day, the RBA governor gave a speech to the right-leaning Committee for Economic Development of Australia (CEDA) – Fireside Chat at the Committee for Economic Development of Australia (CEDA) – where she claimed that unemployment had to rise towards 5 per cent (from its current level of 4.5 per cent) because the labour market was too tight and driving business costs and inflation. The extraordinary juxtaposition of these views is one thing. But the governor’s continual claims that the current inflationary pressures are sourced from the labour market defies the evidence and clearly is intended to give her cover for further interest rate rises.
The labour market contraction that I have been signalling for the last two months continued in August. The Australian Bureau of Statistics (ABS) released the latest labour force data today (September 24, 2026) – Labour Force, Australia – for August 2026 – which showed that the labour market deteriorated further in August, in that full-time employment growth was negative and unemployment rose. I suspect, however, that the September release will show some revisions to the data given the changes that the ABS are making to its survey collection model (see below). Overall, there are now 10.8 per cent of available labour not being used (either unemployed or underemployed), which makes a farce of the RBA’s claims that the labour market is tight. There is substantial scope for more job creation given the slack that is present.
On Sunday (September 20, 2026), the two state elections in Germany confirmed a trend that has been unfolding for some years in fact – the polarisation of politics in nations, and, in particular the legitimisation of far Right politicians espousing views that are not inconsistent with the views of the National Socialists in Germany in the 1930s. Those views were considered the anathema of acceptable in the post WW2 period but now are garnering increased support again. Chancellor Merz called the outcome “a disaster” with the far Right Alternative for Deutschland (AfD) recording the most votes in the – 2026 Mecklenburg-Vorpommern state election. The other interesting result was recorded in the – 2026 Berlin state election – where a Left candidate triumphed echoing the sort of momentum that Zohran Mamdani achieved in the New York in the November 4, 2025 city elections. These results are indicative of the trends that the failure of neoliberalism has engendered. I trace this theme in this blog post.
As at September 9, 2026, the Bank of England held £489,026 million in British government gilts (bonds). Since the beginning of February 2022, the Bank has been steadily selling of the stock of gilts it purchased as part of its Asset Purchase Facility (APF) over the period March 11, 2009 to December 15, 2021. These purchases defined its so-called ‘quantitative easing’ (QE) programme that spanned the GFC and the Pandemic as the Bank sought to keep interest rates (and bond yields) at low levels. The so-called Quantitative Tightening (QT) programme that began in November 2022 is now giving the government political problems because it is one of the reasons bond yields are rising. The whole relationship between the Bank of England and the Treasury is an elaborate farce involving transfers back and forth that have no functional purpose other than to disguise the fact that the government is the currency issuer and has no effective financial constraint on its spending. But while the accounting is farcical it does have real world political implications which work against the elected part of government fulfilling a useful public purpose.