Japan – Tracing the decline in construction employment since 1980

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.

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Kyoto Report 2026 – 2

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.

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Is a high-pressure economy strategy in Japan viable?

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.

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Kyoto Report 2026 – 1

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.

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RBA Monetary Policy Board member refutes on-going claims from the RBA governor about unemployment

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.

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Australian labour market – full-time jobs decline as unemployment continues to rise

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.

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The failure of neoliberalism and the progressive failure to articulate that has engendered the rise of the far Right

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.

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The elaborate farce being played out between the Bank of England and the British Treasury

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.

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Is opposition to the AI development the new Ludditism?

In the early C19th, skilled English textile workers fearing for their future wage earning capacity launched a campaign against the automated machinery that was fast being introduced into the factory system. The initial protests in Nottingham in 1811 spread quickly to Yorkshire and Lancashire. They became known as the – Luddites – a self-appointed title and for the next 5 years or so, the conflict between the workers and the bosses (aided by government) ensued. The workers’ case was really about who controlled the production process and the new technology they were fearful of was just another part of the sequence where capital sought to exert control on the extraction of surplus value from the workforce. Since then, if one expresses opposition to the introduction of new technology one is labelled with that title. The latest battle front in this struggle might be the rapid introduction of Artificial Intelligence, although that process goes well beyond an aim to control workplaces and reflects a broader desire to control society in general.

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Is Keynesianism dead? Far from it – it provides the life support for a crisis-ridden capitalism

On September 28, 1976, then British PM gave an historic speech at the Annual Labour Party Conference held in Blackpool. The speech was written by his son-in-law, one Peter Jay, who himself was mired in scandals throughout his career. For example, the nepotism allegations after he was appointed British Ambassador to the US, his wife’s extra-marital affair with Carl Bernstein, his own affair with the family nanny at the embassy and the resulting paternity lawsuit that Jay initially denied but was found to be the father, not to mention his demeaning relationship with Robert Maxwell. A good candidate for a speech write. In that speech, Callaghan more or less claimed that the Keynesian consensus up to that point (from the Great Depression) was dead and that the fiscal tools that had delivered prosperity in the post WW2 period were no longer effective and should fiscal deficits should be abandoned. How exactly when the non-government sector as a whole desired to spend less than they earned overall was not specified because the lie that cutting government spending was a growth tool dominated. This narratives that Callaghan introduced have been repeated many times since that time when conservative commentators and economists seek attention. The latest appeared in the Financial Times (September 5, 2026) in the form of an article by former Bank of England board member Andy Haldane – Is Keynesianism dead?. He says yes, I say no!

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