Japanese Ministry of Finance official admits, “We are worse than Greece” - Japan’s debt-to-GDP has soared to over 230% - Fiscal deficit is up to 10% of GDP

More proof that the Japanese government is run by a bunch of complete idiots!


From Zerohedge: Japan's Shocking Keynesian Slip: "We Are Worse Than Greece"

In a stunning turn of events, a Japanese Ministry of Finance official admits to Richard Koo's worst nightmare "Japan is fiscally worse than Greece". Bloomberg is reporting that, at a conference in Tokyo, Yasushi Kinoshita says Japan's 2011 fiscal deficit was up to 10% of GDP and its debt-to-GDP has soared to over 230%. What is more concerning is the Kyle-Bass- / Hugh-Hendry-recognized concentration risk that Kinoshita admits to also - with a large amount of JGBs held domestically, the Japanese financial system is much more vulnerable to fiscal shocks (cough energy price cough) than Europe. Of course, the market is catatonic in its reaction to this - mesmerized by the possibility of buybacks and hypnotized at big-banks-passing-stress-tests - though we do note the small reverse stronger in USDJPY has reversed as this news broke and the USD pushes modestly higher.

Now why in the world would this government wonk admit this in public? This will only cause the bond market to worry and perhaps the flight of foreign capital!


Two words: Got gold?

In 1949, Japan Started on the Road to Prosperity by Eliminating Sales Tax! Let's Dream a Dream for Japan Again!!

Besides eliminating sales tax, Japan also pegged the yen to gold and lowered income tax rates. I've written over and over that increasing sales tax is not the answer to Japan's problems. Tax increases without cuts won't help us. We need to cut spending and cut taxes and return the yen to a stable currency.

Akihabara in 1945 and 2001

Need proof? It worked in Japan after the war to create the greatest economic recovery the world has ever seen!


Forbes Magazine writes in an article from Feb. 3, 2012: Let's Dream a Dream for Greece:

Japan’s recovery started with a dream, among politicians and business leaders. In their imagination, Japan would rise from the ashes – actual, real-life ashes – and become again a great and prosperous nation.

This clear vision quickly led to a plan of action. The situation in 1949, of hyperinflation and crushing taxes, was plainly not in accordance with the goal of a prosperous Japan, so the leaders set about fixing the problem.

They had virtually no resources to do so. The economy consisted mostly of black-market subsistence, tax revenues were negligible, and issuing debt was impossible. Since tax revenue was far less than the government’s needs, the government subsisted mostly by printing money, with the usual consequences.

One of the first things they did was to make government debt issuance illegal. It remained so until 1965. Then they refused any more economic aid.

In 1949, they pegged the yen to gold, immediately ending the hyperinflation.

Then, they eliminated the consumption tax (national sales tax).

Japanese gold coins from the 1850s

In 1950, the income tax schedule was revised. The top rate fell to 55% from 85%. But more importantly, the income at which that rate (and others) applied was raised dramatically.  This rate originally applied to income of 500,000 yen. By 1957, the 55% tax bracket applied to income of 10 million yen, twenty times higher.

In 1951, interest and dividend income were taxed at a separate, lower rate. In 1953, capital gains were exempted from taxation completely. Interest income was taxed at only 10 percent. Businesses received a truckload of favorable treatments, in the form of accelerated depreciation, deductions, and exemptions. In 1955, interest income was made tax-free.

Throughout the 1950s and 1960s, the government had a specific goal: to keep tax revenues, and the size of the government, below 20% of GDP. They reasoned that this would be best for the brisk growth of the private sector. It worked.

The Japanese people, as we know, became wealthy in those years. Wealthy people are able to pay more in taxes than poor people. Between 1950 and 1970, tax revenues of the central government increased by sixteen times, all in non-inflationary gold-linked yen.

As the country became wealthier, and GDP grew, then the services that the government could provide on a budget of 20% of GDP grew as well. Welfare and national healthcare plans were added. Dirt roads were paved. Sewage systems were built. There was no conflict between government services and the private sector. Both became prosperous together.

This story is well known to those who follow such things.

Read more here.

Thanks to Aaron Egon Moser

Tax and Spend. Tax and Spend. Tax and Spend. Lather, rinse, repeat.

While driving along the road in front of Waikiki beach, I saw a building that said, "Department of Homeland Security" right next to the harbor. I laughed. Prime location on the beachfront and the federal government has a brand new building for the Department of Homeland Security, in Waikiki no less. Isn't that ironic?

Jack Lord would have been proud.

"Book 'em Dan-o!"

Don't forget that this is the same federal government that was in charge of security when the Twin Towers were attacked on Sept. 11, 2011. Most people who blow their jobs get fired. Not these guys. They get nice offices in Waikiki. 

Funny, you know, if you were the fire chief of some hick town and screwed up  your duties on that day and a bunch of buildings burned down, you'd be fired or would certainly lose your job. Not the government though. They increase our taxes and expand their incompetent services. That's the way the government operates, you know. Their answer to every problem is to tax and expand. 

That's how it works, you see. 

People who have been paying attention will already know that golden rule of politics. And that rule is that no matter what occurs the government response will always be an expansion of that government and that will mean higher taxes for you and me no matter how you slice it.  

So bend over and take it.

On that note, there’s a couple of news stories about Japan that caught my “WTF!?” radar yesterday. I thought I’d write about them today. See if you can catch the irony of the situation.

The clowns in control of the Japanese government claim that they need to increase the current Sales Tax rate of 5% up to 10% in order to cover shortfalls in tax revenues and a burgeoning social insurance liability. They also are using the excuse of the March 11 earthquake, tsunami and nuclear accident at Fukushima as a ruse to fool the public that this tax increase is needed and is for the public good.

If it is for the public good, well then, they are not at fault for poor management, you know. Public good and all... But hey, weren't they just claiming that they needed to raise taxes for a different reason before the March 11 earthquake? Why, yes, they were! Then it was out of control spending.

But not now! No! Now is because we are all Japanese people and we must stick together to raise taxes to help the people up north. 

By claiming that monies will be used for reconstruction of the northern Japan region of Tohoku, the government can act like they have no choice but to  increase taxes for the betterment of the public. They’ll claim that they are being “forced” into raising taxes and it can’t be helped due to circumstances outside of their control.

Never mind the fact that Japan’s public debt, by this very same government and preceding administrations pushed the debt to past 200% of GDP long before the March 11 disaster struck. 

Regular readers of this blog will know what I think about this sort of political bandwagon nonsense. 

Here are two articles that I found that I’d like to share with you that shows just what kind of shenanigans go on in the halls of power at Nagatacho.

The first from the Daily Yomiuri newspaper about how the government of Naoto Kan, in spite of being resoundingly defeated in the last election due to an insistence on increasing Sales Tax, is going to push it through no matter what. 

Public opinion and a frail economy be damned. Great timing, eh? No election coming up and all. I wonder what the angle is for the criminals of the LDP? The Daily Yomiuri newspaper:

The government and the Democratic Party of Japan agreed on tax reform plans this week, and plans to submit related bills during the Diet's ordinary session next year. 

Woah! Watch out! "Tax reform" is a code-word for "Tax increase." 

It will need to clearly stipulate in those bills when the consumption tax should be raised and by how much.

Translation: One party agrees to tax hikes and "budget cuts" as long as their pork barrel projects remain intact.

However, there are piles of tasks to be completed before that can happen, such as deciding standards by which to assess the national economy's ability to withstand the tax hike, and determining how tax revenue should be shared between the central and local governments.

Yes. The pirates must always decide how to divvy up the loot.

Thus, the government will have to overcome some high hurdles to realize the agreed plan to raise the consumption tax rate to 10 percent "by the middle of the 2010s."

Hopefully those hurdles will be so high that they kill themslves on the way back down. Faithful readers of this blog might remember my post entitled: Japan's Government Headed for Ouster? Good. The Sooner, the Better. Where I pointed out that the best government that we could possibly hope for is one in constant deadlock because, if they are in deadlock, they can't pass any news taxes. See? I was right. That slimeball Kan snookered his way back into power and now they're talking about raising taxes.

Am I genius or what? No. Not genius. All governments are the same sneaky lowlife. I am merely an astute observer at best.

The bad news continues:

The government's plan is to raise the consumption tax rate in two stages. At first, the rate will likely be bumped to 7 percent or 8 percent in autumn 2013 or later, and then to 10 percent by the end of fiscal 2016.

Great! This means we still have a chance to boot these clowns before they do anymore damage.

It is feared that a single, all-at-once increase to 10 percent might hurt the nation's real economy.

Gee. Do you really think so? It's been proven that an increase in taxes coordinates with a corresponding decrease in tax revenues. Haven't these idiot politicians never heard of the Laffer Curve? No? OK. From Wikipedia:

One potential result of the Laffer curve is that increasing tax rates beyond a certain point will become counterproductive for raising further tax revenue because of diminishing returns. 

Gee wasn't the opposition LDP just claiming that they were against Naoto Kan's plans for reconstruction and didn't they just stand in the last election firmly against any increase in the Sales Tax rate? The Economist reports:

"...opposition parties have threatened to block implementation of the spring budget for the next fiscal year. Without big concessions..."

"Without big concessions!?" Gee, do you think that means that you grease our wheels and we grease yours?... Nah!

You know what is going on here, folks, is that the LDP wonks actually want to increase taxes too but they see a golden opportunity to increase those taxes while at the same time making Naoto Kan and the dimwitted Democratic Party of Japan (DPJ) take the blame for it.

See? The LDP gets their cake and eats it too and then win the next election because they can claim that they were against any tax hikes. Those sneaky genius bastards! Gotta hand it to them though… They didn't get to run this country for iffy years by not knowing how to play a very hardball game of poker.

Kan and those clowns are out of their league. The LDP is going to secretly get their tax increase (they were the ones who first put a Sales Tax into place) and they are going to blame the DPJ and return to power.

The next article would be a real head-scratcher except if you remember the golden rule: that no matter what occurs the government response will always be an expansion of that government and that will mean higher taxes no matter how you slice it.

The Japan Times reports that in 2010 Japanese government revenues actually jumped 7.1%!

Tax revenues for fiscal 2010 rose 7.1 percent from the previous year to ¥41.49 trillion, exceeding the earlier forecast of ¥39.64 trillion, thanks to improving corporate earnings, the Finance Ministry said Friday.

Did you do a double-take on that one? I sure did. WTF? The government coiffures  actually increased by more than 7% last year and these clowns still want to raise our taxes?!

Just to prove to you how much of a scam this all is and how completely and totally fiscally irresponsible these people are, here's another article from Feb. 24th, 2011, two weeks before the Tohoku earthquake and tsunami, that gives another totally different reason for raising our taxes: Government debt to GDP. From Bloomberg:

Moody's said that it cut its outlook on the credit rating on Japan because of “heightened concern that economic and fiscal policies may not prove strong enough to achieve the government's deficit reduction target”.

Also they said the government's policies would probably not be able to “contain the inexorable rise in debt, which already is well above levels in other advanced economies”.

Analysts said that the move by Moody's was widely expected after S&P's decision to cut its rating. However, they added that while it may have a limited impact on the bond and currency markets, it could have broader political implications.

“Politicians or the finance ministry could use this as a reason to push for fiscal reform, which could include a sales tax hike,” said Satoru Ogasawara, an economist at Credit Suisse. 

Uh oh, there's that "reform" word popping up again.

It looks like these people have their hearts dead-set on raising our taxes one way or another. It would never do to be responsible to do something like, say, cut spending. Oh no! Can't do that.

Twenty years of this sort of out of control spending and tax increases have landed this nation right where it is today: With a faltering economy and massive debt and our credit rating slashed.

At this rate, all we can realistically expect is twenty more years of the same.... That is if we don't go bankrupt before then.