Japan’s proposed investment boost will not run out of yen

The prophets of doom (Japan division) are back in town predicting the worst for the country. The UK Guardian even is getting in on the act (July 25, 2026) – Can Japan avoid a Liz Truss-style shock as its PM embarks on a giant spending spree?. It is interesting now that the prophets have a new ‘case study’ to provide them with a reference point for their predictions of chaos. I wrote about that in this blog post – Rinse and repeat – Truss chaos – the new benchmark (March 28, 2024) – and gave some Japanese context sometime later in this post – Those who invoke the ‘Truss Moment’ should look at what is happening in Japan (February 12, 2026). Apparently, the plans by the Japanese government to revitalise public infrastructure and crowd in private investment will see the “International investors” will lead to a “Liz Truss-style economic shock”. I wonder every day what these journalists think of their lives when they reflect on what they write. It can’t be a very fulfilling life when it is based on beat-ups, conspiracy-style fictions, and the rest of it. One of the rules of composition that I was taught in university was that an argument had to be internally consistent. These types of articles cannot even get that rule right.

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A shift to fiscal surplus in Australia would amount to a criminal act by government

The former head of the Australian Treasury claims that: “Everybody knows the budget should be in surplus right now.” Well last time I checked I was still part of the body of humanity and I don’t know that. In fact, the fiscal balance is currently recording a deficit (which should be referred to as a net public injection of financial assets to the non-government sector) which by all indicators is not large enough. The commentators that are blindly repeating the former Treasury head’s assertion really haven’t much idea of how the system works and what the implications of a shift to surplus would have for the overall prosperity of the nation and its people. They blindly rehearse fictions about fiscal deficits pushing up interest rates and leaving future generations worse off. The reality is that if the Federal government could somehow move to surplus, there would be a recession and the number of available workers who were either unemployed or underemployed (currently 10.9 per cent of the available labour force) would rise significantly. That would undermine the well-being of tens of thousands of workers and their families. The call for fiscal surpluses completely ignores the macro linkages that bind the sectors in the economy together. Such a shift would amount to criminal neglect.

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RBA governor makes another self-serving public presentation ignoring the dismal reality she is helping to create

Earlier this week (July 28, 2026), the Governor of the Reserve Bank of Australia presented to a fundraising event in Sydney on the topic of – Monetary Policy in an Era of Shocks. Later she conducted a Q&A session where she declined to answer key questions about the policy choices the RBA has taken under her leadership, opting instead to treat the assembled as bereft of basic analytical capacity. The speech continued the sequence of self-serving misrepresentations of the true state of the Australian economy. Apparently, the RBA thinks that a broad labour underutilisation rate of 10.9 per cent (that is, resource wastage approaching 11 per cent) and a capacity utilisation at its lowest since June 2020 (when lots of production enterprises were shut!) is still below the slack needed to restore ‘balance’ (full employment). The prominence of central banks and monetary policy as the primary macroeconomic counter-stabilisation policy tool is one of the worst aspects of this neoliberal era. At some point, we will understand that the central banks should be reduced in their role and self-serving appearances of the senior staff at public events terminated.

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Another neoliberal institution shown to be unfit for purpose while lining the pockets of private equity and millionaires

Over the last several years, I have been indicating that I think we are in the endgame for neoliberalism as a dominant ideology. On many fronts, the signs are that its institutional structure has failed and the promises that justified that structure have not materialised. I know there is a difference between the promises to sell the idea (that we would all be better off) and the true motivation (to enrich the already wealthy and consolidate their hegemony). But short of military dictatorship where the top-end-of-town control the military, major economic changes are conditioned by the legislative and regulative structure created by government. That means that the voters have to be convinced that change is worthwhile. Neoliberalism thrived because the elites reconfigured the state to serve their interests after the social democratic era saw the state play a mediation role in the class conflict. That reconfiguration was driven by an intense public relations campaign to manipulate the public perception. The working class was divided into segments and segments were turned on other segments (the ‘dole bludgers’, the migrants, trans people, etc) as part of the strategy. The strategy enriched the architects beyond belief but for the rest of us the outcomes have proven dysfunctional to say the least. Now the endgame is upon us as the evidence continues to stack up that neoliberalism was an elaborate con to enrich the already rich and powerful. A report from Australia last week added to the evidence. It shows that one of the defining manifestations of neoliberalism in Australia – the privatised job services system has failed badly and only serves to fills “the pockets of private equity and millionaires, while leaving jobseekers without work”. Another brick in the wall falls.

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Australian labour market – shifts towards part-time work perhaps the first signal that a contraction is coming

The Australian Bureau of Statistics (ABS) released the latest labour force data today (July 23, 2026) – Labour Force, Australia – for June 2026 – which provided mixed signals about the state of the labour market. While employment growth was positive, it was biased to part-time work, which is perhaps signalling a weakening as the first adjustment typically made by employers is to reduce hours of work before they cut jobs overall. However, on the other side, participation grew, which means more workers are either working or seeking work. However, the bias towards part-time work was manifest in the rising underemployment rate. There are now 10.9 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. There is substantial scope for more job creation given the slack that is present.

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CEO pay excess in Australia continues

In addition to the basis academic research that occupies my working time and is funded by national competitive research funding agencies such as the Australian Research Council, I also do commissioned work for various organisations, mostly unions and community groups. That income allows me to also cross subsidise the basic research and is how a research centre in a modern Australian university manages to stay afloat. In the latter work, I am always confronted by government lawyers or the experts the government hires to challenge my assessment of reasonable pay increases for union members in matters that appear at the Federal Fair Work Commission or the state-level Industrial Relations Commissions. I am always appalled by the willingness of these government agencies to spend millions on high paid consultants and lawyers just to stop their workforce enjoying a pay rise. The same agencies look the other way when their executive pay is in focus. And as a result of wage suppression for workers and the free-for-all at the top, the ratio of executive to average earnings is skyrocketing. This trend summarises the inherent inadequacy of capitalism for most of us who depend on real wages growth to enhance our material standard of living in economies that are growing. Two recent reports, one in the UK and one in Australia highlight the indecent state of affairs where CEOs can earn more than 130 times the annual salary of the median full-time UK worker and 55 times the annual salary of the average full-time worker in Australia. The top paid CEO in Australia gets 316 times the average, full-time salary in Australia.

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Proposed pension reform in Japan (and elsewhere) misses the point

Earlier this year, I analysed how decisions taken by the Japanese Government Pension Investment Fund to speculate in global financial markets have played a significant role in the depreciation of the yen. In this blog post – Japan’s Government Pension Investment Fund and the yen – mainstream macro myths driving bad policy (February 2, 2026) – I demonstrated how massive quantities of workers’ savings held by the GPIF are being channelled into the private, for-profit investment banks and hedge funds, which deliver huge profits to these financial market players. Moreover the GPIF has shifted its investment portfolio significantly towards foreign bonds and shares post 2010, which has seen the GPIF selling large tranches of yen and adding to the excess supply in foreign exchange markets. The Japanese Finance Minister is now pressuring the GPIF to reallocate its portfolio into domestic assets to boost the domestic growth rate. A similar trend is happening in the UK and Australia. What does it mean? The conclusion lets you see that their proposals miss the point.

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Imagine if the British government wrote off its holdings of its own debt

Last week, I considered recent research published by the BIS – Bank of International Settlements pushing the ‘growth friendly austerity’ myth – which was a classic example of how the sense of urgency and crisis is engendered by constructing the narrative in such a restricted manner that real world options are excluded which contradict the mission. If we assume that key features of any system are unable to be activated, then it is easy to speculate that the system will fail. This communication technique abounds in the financial and economic commentariat and leaves listeners and readers with a sense of anxiety and distort the political process. The commentaries that typify this approach all invoke a sense of urgency – ‘act now or else’ – and like to quote large dollar (pound, yen etc) sums because the commentator knows that our eyes glaze over with numbers that are beyond our own experience. Further, when the article parades as an Op Ed, the writer regularly just rehearses some press release or perhaps, less formal statement, that some organisation like the IMF has made. The other part of the scam is that these organisations are elevated into the sphere of sources that are to be believed without question. Two recent examples are the recent articles appearing in the UK Guardian – Burnham’s funding gap: what state are UK finances in for the PM-in-waiting? (published July 3, 2026) – and – Act soon to change ‘unsustainable’ direction of UK debt, OBR warns (published July 7, 2026).

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Bank of International Settlements pushing the ‘growth friendly austerity’ myth

I have been ‘at it’ for decades now but it never ceases to amaze me how mainstream macroeconomic analysis is carried out and the way the public just accepts the conclusions without understanding the basis on which the analysis generates those conclusions. Chapter II in the BIS Annual Economic Report (released June 28, 2026) – High public debt and shifting financial markets: challenges for central banks – exemplifies this point. The conclusions are rather stark but they all flow on some key assumptions that could be varied at any time by the government, which would nullify the conclusions. In other words, the projections of crises and monetary emergencies are all predicated on the assumption that the government would not step in with its unique capacities to prevent the catastrophe. In what world would we think that would happen? Not the real world, and the GFC and pandemic are recent examples where the alleged constraints are jettisoned by government in the blink of an eye.

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Depreciating yen – look beyond the obvious for the explanation

The editorial in The Japan Times (July 3, 2026) – Little hope for a declining yen amid structural pressures – is an example of how mainstream commentators seize on superficial facts, apply some ideology, and come up with the wrong conclusion. As I have noted many times, the challenges facing Japan are many, not the least being the high savings rate, which is dominated by corporations. After the asset collapse in 1991, Japanese corporations have become large-scale net savers, with strong profits and very weak investment. The corporations are sitting on massive stockpiles of cash and liquid assets, and use on-going financial surpluses (profits greater than costs) to reduce their debt exposure. The 1991 crash (and the massive debt buildup that preceded it) has left a psychological scar on the Japanese firms. The Takaichi strategy is to ‘shock’ the economy into increasing investment rates via a large fiscal injection. This has implications for the currency value, which I will explain.

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