Mr Noda playing musical chairs

14 Jan

Welcome readers,

Well it was only a question of time before the current prime minister of Japan Yoshihiko Noda was put into a position where he had to shuffle his cabinet. It truly was a shuffle as very few new names were added, rather they were moved to different job titles. Those who departed did so because they had firmly planted their scented sandals deep into their collective sushi holes.

For those of you who don’t know the current state of government affairs here, its very similar to a carousel, or if you prefer a merry go round depending on your political preference. Things start out swimmingly with a brand new PM, everything seems bright and shiny with the ring ever so close to the outstretched hand. The music starts and we are off to a land of fun and excitement. However soon enough the music wanes, the rotation slows and the ride ends in single digit approval ratings. The Japanese by and large have many strong points, they are a resilient people, hard working, generous as well as diligent in their studies. A glaring weak point however is clearly the inability to confront just about anything controversial.

As of January 2012, Japan has had 6 Prime Ministers since 2006. More than a few rides on the painted wooden horse. Further 3 of these same men were previously the Finance Minister. It doesn’t take much to see a pattern developing does it ? I will save you the time of looking up the current financial minister, his name is Jun Azumi and in this gaijin’s opinion its only a question of time before he is sitting in the PM chair.

The pattern is always the same. Its a broken record that everyone here has heard before, but because its taboo to broach certain subjects its business as usual over in Tokyo. Hooray! Another coin to ride the horsey.

So this leads us back to Mr Noda who is facing approval ratings that makes Mr Obama look like a well run operation. Noda supposedly has plans to hike the national consumption tax which is something that should have been done years ago, yet the can was kicked down the road for someone else to take care of. Sound familiar ?

Currently the consumption tax here is 5%. Who knows where it will end up but my guess is somewhere north of 10%, perhaps near 12%. This will quite likely cause a temporary uptick in consumption as folks buy in before the hike, which the Japanese will gladly report to the world as things “getting better”. This is in a country where the average child per family is 1.34. Tough to keep a ponzi scheme rolling with demographic numbers like that isn’t it ?

Mr Noda has been on the job a total of 4 months, so look for elections to occur sometime before the end of the year if the pattern holds. Hopefully he enacts the dreaded tax increase before he leaves office. As much as it will put a crashing halt to any growth, perceived or otherwise I just don’t see any alternative in attempting to balance the payments.

Its rather well known that the bureaucrats run policy here, the politicians long since yielding authority to the highly educated mandarins in their government offices. So perhaps this is a sign of change, which in itself is probably a welcome thing in a country that embraces a glacial pace of reform, if any at all. The amount of political capital expended to achieve anything must be massive, but that is just speculation on my part.

Funding is a growing issue here despite its taboo nature.

As many of us already know the balance of payments in Japan are already approaching a tipping point. The cost to service the debt is growing while the tax base is not, nor is it likely to do so due to the aforementioned demographic facts. Add to this the absolutely horrible events of March 11 2011. I say events because in fact there were three of them, every one of them a national disaster.

Earthquake, Tsunami and Radioactive contamination;  each enough of a tipping point for a country already dealing with debt finance issues. Its not a pretty sight. Its currently believed that 3% of the entire landmass of country, an area the size of Connecticut has fallout and needs to be “removed”. The Japanese are actually attempting to undertake this in a massive construction program. Can you imagine scraping an entire state of its top soil ? Where would you put it ? We aren’t even mentioning the damage to the infrastructure .

If anyone can do it, the Japanese will. But at what cost ?

Roads, rail, ports, buildings, just about everything “must” be rebuilt. All from a region that has lagged behind the miniscule national growth rates here for the past 2 decades. The Tohoku region is one of the old and the very young. There are very few middle aged people living there. Its the same all across the country as the mega cities of Tokyo, Osaka, Nagoya and Fukuoka cater to the wants and needs of the 20-40 age group.

There is little problem approving the funding programs as the current financial status is handling debt levels more than double the GDP. Its business as usual and everyone casting a vote in government will pat themselves on the back, saying they did the right thing in supporting the affected region. The Finance Minister will go back to his office and look over the numbers edging ever closer to insolvency.

Hey everything is fine, we have a few more coins to spend on the economic carnival of debt. Enjoy the ride while it lasts.

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2 Responses to “Mr Noda playing musical chairs”

  1. Bill Corfield January 14, 2012 at 3:57 pm #

    All rides eventually come to an end, don’t they…

    Looking forward to reading more…

  2. Michael P January 21, 2012 at 5:11 am #

    Nicely written analysis. I learned a thing or two. Thanks Professor 😉

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