Japan’s Sanctimonious Finance Minister

Wolf Richter's picture

Wolf Richter   www.testosteronepit.com

There are certainly some things that Japan can lecture France on, for example standing in line quietly without pushing and shoving and trying to get ahead. Lines in Japan are a display of communal discipline. In France, a line is something to be worked actively. They have an expression for it, faire la queue, to “do the line,” though in recent years French lines have lost some of their edge. Japan can also lecture France on designing and making cars and electronics, though fewer and fewer cars and electronics are actually manufactured in Japan as the country is deindustrializing; blame electricity shortages, the strong yen, and cost factors.

But nuclear safety, for example, wouldn't be a topic Japan could include in its sermon to France, given what now appears to have been its preventable nuclear disaster at Fukushima Number One. For an awesome series of maps that show Japan’s contamination as seen by people in Japan, TEPCO, the government, and people outside Japan, in a tongue-in-cheek way, check out.... Nuclear Contamination As Seen By Japanese Humor.

And most certainly, the other topic that Japan can’t include in its sermon to France is fiscal discipline. And yet, that’s exactly what Finance Minister Jun Azumi just did.

The Japanese fiscal quagmire has no peers among developed nations—by March 2013, the end of the current fiscal year, gross national debt will surpass one quadrillion yen, or $14 trillion, a mind-boggling 240% of GDP.

In France, gross national debt is 86% of GDP.

The Japanese government will have to borrow an astounding 56% of its expenditures (much of it to be printed by the Bank of Japan). The BoJ has been pursuing a zero interest rate policy for years, and yet interest expense on the debt is eating up 52% of tax revenues. So, to fix the problem—which can’t be fixed anymore—the government is trying to raise the sales tax from 5% to 8% by 2014 and to 10% by 2015, which has turned into a life-and-death struggle for Prime Minister Yoshihiko Noda.

In France, the equivalent VAT is already 19.6% on most items—something the otherwise rebellious French have swallowed long ago.

Both are welfare states, but the French government isn’t shy about asking its citizens to pay for most of it now, rather than shuffling it to the next generation or, like Japan, towards a cataclysm that will one way or another bedevil in the current generation. There is no country in the developed world that is fiscally as undisciplined as the otherwise so disciplined Japanese.

And yet, amazingly, fiscal discipline is exactly what Jun Azumi included in his sermon to President-Elect François Hollande when he pressured him to maintain the fiscal policies and budget focus of outgoing President Nicolas Sarkozy.

“We want France to do what has been decided so far, and I’d like to tell them about that if there is the opportunity,” he said on Tuesday at a news conference in Tokyo.

On Monday he'd already come out swinging when he claimed that Hollande "fully understands" that European finances would need to be sanitized despite loud and clear campaign promises to the contrary. Hollande wanted to renegotiate the fiscal union treaty that attempted to get the 25 EU countries that signed it to live within their means. He wanted to focus on measures of “growth,” namely deficit spending, including on large projects, preferably with "European" funds, rather than French funds.

“I want him to act based on understanding the schemes and thinking that we, the IMF, and the G-7 have cultivated up to now,” Azumi said sanctimoniously.

But there is a difference. In Japan, funding out-of-control deficits and rolling over the gargantuan debt has been made possible by the institutional setup and cohesive psychology of Japan Inc.: 95% of JGBs are held within Japan. Individuals directly or indirectly hold over 50%. Government-owned or controlled institutions hold over 40%. Among them: the Government Pension Investment Fund, the government-owned Post Bank, financial institutions the government can lean on, and the BoJ. Foreigners hold only 5%. Hence, speculators and foreigners cannot inflict a debt crisis on Japan. But they can on France.

Azumi warned of "destabilizing" effects that the election results in France and Greece could have on the foreign exchange markets and worried about a further rise of the yen against the euro—and perhaps he saw the Greek drachma on the horizon, to be drastically devalued, rendering Japanese goods unaffordable in Greece. And if the wave of returning to former currencies continued to Spain, Italy, or France....

The arrival of Hollande, the “President of Growth,” was greeted with excitement—or exasperation—in Europe, while Sarkozy confirmed he’d quit politics. He complained about journalists dogging him. “I’m spied on,” he said (ironically). “I hope they will leave me alone.” But that’s precisely what they won’t do because, on May 15, he’ll lose his immunity that has protected him so far against a ton of malodorous allegations. Read.... Blowback from 15 Years of Campaign Finance Shenanigans.

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shovelhead's picture

Save Japan.

Buy a bonsai tree.

jaffa's picture

The types of financial reports available and choose one that will be the easiest for you to maintain on a monthly basis. If your operating system is Microsoft, then Microsoft Works or Microsoft Office will have a financial report form. Many business owners prefer Quicken or Excel to create a financial report, but it's a matter of personal preference. Thanks.

Government Factoring Basics

wify's picture

If you want, you can also set up delivery in-store and have a Sleepy's delivery driver bring the mattress to your home on a scheduled date. Delivery costs depend on which mattress you purchase and vary based on this information as well as any delivery specials the Sleepy's location may be running. Thanks a lot.
Filing Bankruptcy Canada

midgetrannyporn's picture

The second to last paragraph nails it.

fuu's picture

Tepco being nationalized, and raising electricity rates 10%.

GCT's picture

Maybe he is doing this because Japan is heavily invested in Europe and if the dominoes start Japan's banks will collapse.  Japan is not known for stating the obvious.

AnAnonymous's picture

Or they are disciplined ponzi masters.

US citizen japanese have borrowed from themselves what they did not have.

US citizen japanese have lent to others what they have borrowed from themselves.

US citizen japanese urge others to sacrifice themselves.

Others have to sacrifice themselves so they can pay back what they've borrowed from US citizen japanese.

What they've borrowed from US citizen japanese and what US citizen japanese did not have in the first place.

Disciplined ponzi masters.

akak's picture

Tell us again about your time-traveling Easter Island US Citizens, please!
Out of all your wild citizenism fairy tales, that one is my all-time favorite.

JohnKozac's picture

When does Japan default on the Yen...or have they already de facto?

JamesBond's picture


LIfe goes on in Japan as usual

DavidC's picture

I wonder how long before Carla Bruni leaves Sarkozy - she won't like not being at the top of the tree now.


Peter Pan's picture

The mess we are in is dangerous not because of its size but because of the denial that accompanies it. And that will be our undoing as we further tighten the spring that eventually snaps.

MrNude's picture

I never get tired of watching Japan's zombie economics and the sleight of hands to keep the yen artificially low.

q99x2's picture

Sarkozy was CIA/MI6 he did what he could.

hangman's picture

Only way for Japan to get out of this mess is to tax the hell out of diapers (Japan sells more diapers to elderes than to babies).  Old Japan: polite-at least in front you-after we nuke them.  New Japan: malodorous-don't f$#@ with us-after nuke themselves.



azzhatter's picture

Probably one tax Buffett would be against, he is surely a big user

SgtShaftoe's picture

The irony is France may have a however brief laugh at Japan if they implode before France does. It's a race to see who's demographics and fiscal insanity detonate first. Then as we're watching it wlll come for us.

williambanzai7's picture

He is just jealous that all the high end French wine now goes to Chine.

Joe The Plumber's picture

Lol and what do the chinese do with premier cru bordeaux? Sweeten it of course!

OpenThePodBayDoorHAL's picture

My brother is a fine wine merchant and went on a sales call to China. Their best wines, 1er Grand Cru $200+ per bottle, were selling very well. He watched as they opened a bottle, sniffed the cork, poured it...then topped up the glass with Coca-Cola.

That was a few years ago, better now I'm told. Still hilarious.

williambanzai7's picture

I am sure HK is now the main destination for high end bottles like Petrus.

Precious's picture

Maybe he's not sanctimonious.  Maybe he's just another Freemason puppet fool of the British.

shuckster's picture

Japan's nuclear reactor failed for two reasons - corrupt Japanese officials who allowed substandard construction of the plant, and GE, who made the plant, and went along with the substandard construction despite the risk it posed to Japanese citizens and citizens abroad

Bicycle Repairman's picture

By substandard construction, I expect you mean substandard design.  Putting spent rods 7 stories in the air is absolutely mind-boggling.  And more amazingly they actually put the rods there.

Precious's picture

Maybe it never occurred to anyone that GE, being the tool of the globalists, simply carried out the order to destroy Japan from within by selling it shit from America that it couldn't refuse because it has no legitimate constitutional ability to protect itself from a malevolent U.S.A. war machine.

Joe The Plumber's picture

Now we just need to sell a few reactors to china. I recommend using the roof as a cooling pool