This category focuses largely on matters pertaining to Japan

There will not be a fiscal crisis in Japan

The global financial press think they are finally on a winner (or should that be loser) when it comes to commentary about the Japanese economy. Over the last few years in the Covid-induced inflation, the Japanese inflation rate has now consolidated and it is safe to say that the era of deflation is over. Coupled with the government (and business) goal of driving faster nominal wages growth to provide some real gains to offset the long period of wage stagnation and real wage cuts, it is unlikely that Japan will return to the chronic deflation, which has defined the long period since the asset bubble collapsed in the early 1990s. It thus comes as no surprise that longer-term bond yields have risen somewhat. But apparently this spells major problems for the Japanese government. I disagree and this is why.

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Japan sales tax debate continues – Reiwa are the only Party that understands the reality

On July 22, 2025, the – 2025 Japanese House of Councillors election – will be held. I have a good friend who is standing for the – Reiwa Shinsengumi – which is a genuine progressive, Left-wing party, not like the fake progressive parties these days that masquerade as social democratic parties (for example, British Labour, Australian Labor, US Democrats, to name a few of many). My friend is the endorsed candidate for the Kyoto Electoral District (頑張ってね、みなこ). One of the major policies that Reiwa proposes is the abolition of the consumption tax. In fact, this election has spawned widespread opposition to the consumption tax from other parties as well. It has been a highly contentious issue in Japan for several decades and its introduction and regular increases to the present level of 10 per cent reflects the dominance of neoliberal misinformation about the fiscal capacities of the Japanese government. Perhaps, this election we will see some more sensible outcomes.

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The intersection of neoliberalism and fictional mainstream economics is damaging a generation of Japanese workers

The – Japanese asset price bubble – burst in spectacular fashion in late 1991 (early 1992) following five years in which the real estate and share market boomed beyond belief. The boom coincided with a period of over-the-top neoliberal relaxation of banking rules which encouraged wild speculation. The origins of the boom can be traced back to the endaka recession in the mid-1980s, after the signing of the – Plaza Accord – forced the yen to appreciate excessively. This was at the behest of the US, which wanted to reduce its current account deficit through US dollar depreciation. The narratives keep repeating! This post, however, is not about the boom, but its aftermath. The collapse in 1991-92 marked the beginning of what has been termed the – Lost Decades – which was marked by a trend slowdown in economic growth, deflation, and for the purposes of this post, cuts in real wages as nominal wages stagnated. While the long period of wages stagnation was bad enough for Japanese workers, there is still hardship coming as the cohort who entered the labour market during this period reach retirement age. This post is part of work I am doing on Japan, which I hope will come out in a new book early next year after I return from my annual working period in Kyoto towards the end of this year.

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US cars don’t sell in Japan because they are inferior and ill-suited to the market

It’s obviously becoming difficult to keep track of where the US government policy is on any particular day. Last week, it was ‘Liberation Day’, which included tariffs being imposed on remote penguin colonies in the back of nowhere, then Musk labelling the Trump’s trade adviser ‘dumber than a sack of bricks’, then tariffs on Chinese goods rising to 124 per cent (which will make then uncompetitive), then the ‘pause’ on reciprocal tariffs beyond the 10 per cent level … what will be next. These shifts and decisions are not exactly benign and the US Administration is displaying the sort of incompetence, capriciousness, flippancy – whatever you want to call it – that hardly befits the largest economic nation in the globe which has its tentacles spread far and wide. I was particularly interested though in the now infamous ‘Rose Garden Liberation Day’ speech Trump made last week (April 2, 2025) where he made claims about Japan, which were used to justify the imposition of 24 per cent tariffs on that nation. According to the President, Japan is among a host of countries that have “looted, pillaged, raped and plundered” the US. His evidence? None is available. The reality is that US cars don’t sell in Japan because they are inferior and ill-suited to the market. We explore that theme in this blog post.

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Bank of Japan research refutes the main predictions made by economists about the impacts of large bond-buying programs

Welcome to 2025. My blog recorded its 20th year of existence on December 24, 2024 which I suppose is something to celebrate. But when I look out the window and try to find optimism I fail. Who knows what the year holds and global uncertainty is dominating the narratives surrounding economic developments. We have a crazy guy about to take over the US along with his band of crazy guys. Government coalitions are failing all over the place and international cooperation is giving way to nationalism. We have Israel still slaughtering tens of thousands of innocent civilians using the equipment made available by the US and other advanced nations. Apparently opposing that slaughter makes one anti-semitic. I could go on. Those observations will clearly condition my thinking in the next year. But today, I am catching up on past work. On November 29, 2024, the Bank of Japan published a research paper – （論文）「量的・質的金融緩和」導入以降の政策効果の計測 ― マクロ経済モデルQ-JEMを用いた経済・物価への政策効果の検証 (which translates to “Measuring the effects of the “Quantitative and Qualitative Monetary Easing” policy since its introduction: Examining the effects of the policy on the economy and prices using the macroeconomic model Q-JEM” – the paper is only available in Japanese). The research uses innovative statistical techniques to assess the impact of the low interest rate, large bond-buying strategy deployed by the Bank of Japan between 2013 and 2023. The Bank of Japan research refutes the main predictions made by economists about the impacts of large bond-buying programs.

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The Japanese government is investing heavily in high productivity sectors and revitalising regions in the process

Last week I noted in my review of the Australian government’s Mid-Year Economic and Financial Outlook (MYEFO) – Australian government announces a small shift in the fiscal deficit and it was if the sky was falling in (December 19., 2024) – that the forward estimates were suggesting the federal government’s fiscal deficit would be 1 per cent of GDP in 2024-25, rising to 1.6 per cent in 2025-26 before falling back to 1 per cent in 2027-28. The average fiscal outcome since 1970-71 has been a deficit of 1 per cent of GDP. I noted that the media went crazy when these estimates were released – ‘deficits as long as the eye can see’ sort of headlines emerged. It was fascinating to see how far divorced from reality the understandings in Australia are of these matters. Meanwhile, the RBA keeps claiming that productivity is the problem and the reason they are maintaining ridiculously high interest rates even though inflation has fallen back to low levels. My advice to all these characters is to take a little trip to Hokkaido (Japan) and see what nation building is all about. The Japanese government has already invested ¥3.9 trillion for semiconductor industry development since 2021 (that is, 0.7 per cent of GDP) and the Ishiba government recently announced a further ¥10 trillion (1.7 per cent of GDP). Meanwhile, the overall deficit is around 4.5 per cent of GDP and no-one really blinks an eyelid. The Japanese government is investing heavily in high productivity sectors and revitalising regions in the process.

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The federal government would sack the RBA Board and Governor except it is too busy jumping at its own shadow

It’s Wednesday and as usual I cover a few topics briefly rather than provide a deeper analysis of a single issue. Today, I consider yesterday’s RBA monetary policy decision which held interest rates at elevated levels despite the inflation rate dropping towards the lower range of its targetting band. The RBA has lost credibility and the federal government should sack the RBA Board and Governor. The problem is that the federal government is too busy jumping at its own shadow to actually take any meaningful decisions about almost anything. I also reflect on the recent decision by the Nobel Committee to award the Peace Prize to the – Hibakusha – which reminds us of the devastation that nuclear arms can (and did) cause. Some other matters then precede today’s great music segment.

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Japan’s new proposed national strategy has to overcome the domination of imported neoliberalism – Part 1

My colleagues and I at Kyoto University met the night before I flew back to Australia this year to discuss the on-going research collaboration, which will define part of my work over the next few years. I hope we can announce a major event in Kyoto or Tokyo in October or November 2025 to disseminate the first stage of the research results. The topic is broadly characterised by the working title – The Future of Japan – Challenges and Opportunities – and aims to articulate the contemporary challenges facing Japan – juxtaposing the mainstream framing (with associated economic narratives) with a framing based on Modern Monetary Theory (MMT). It is a very broad project and we will have to work over the next few months to make it tractable. The Project aims to develop an alternative blueprint for economic development, one that is centred on advancing the needs and aspirations of the people and moving away from a compliance to the corporate needs. My contribution will draw on the current work I am doing on degrowth and delinking (breaking the yoke of Colonialism in poorer nations) and explore the notion that Japan can actually take ‘advantage’ of its shrinking population to demonstrate how key degrowth strategies can actually be implemented. We will also be running at odds to the Japanese government’s recently announced (October 2024) – JIIA platform – which is the government’s major national strategy statement. The fact that the current government thinking is a reflection of its neoliberal leanings, which have not served the nation well, stands in contrast to the ‘opportunities’ we identify once we adopt an MMT lens. Here is a bit about that thinking and, of course, over the next year (at least), I will periodically update readers with the progress of our work.

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Kyoto Report 2024 – 7

This Tuesday report will provide some insights into life for a westerner (me) who is working for an extended period at Kyoto University in Japan. This is my final report for 2024 as my working time at the university is completed for another year and we will resume these reports in 2025 when I return.

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