• Ito, Shizuoka


Regarding the Aug. 11 front-page article “Upper House passes bill to hike sales levy“: As someone who lives in Japan, I think raising the consumption tax at this time is an ill-conceived idea and one that could very well be the impetus for economic disaster.

Japan’s economy is indeed in serious trouble with an aging population and increasing public debt. But Prime Minister Yoshihiko Noda’s attempt to use Keynesian economics to remedy the problem will not help. Keynesianism has not helped since the Great Depression. The higher consumption tax (scheduled to rise from 5 percent to 10 percent by 2015) will force the already struggling Japanese public to buy less in general.

Automobile sales will be affected as well as revenue for all related suppliers and businesses. Companies will be forced to contract, thereby increasing unemployment and public debt due to the social programs needed to support them. Land prices will plummet, causing a crisis in the already dysfunctional real estate market and in the banking sector. The reduced value of banks’ assets will significantly tighten already tight credit markets.

The ruling Democratic Party of Japan has already done a lot of damage to credit markets with legislation aimed at curbing predatory lending. The legislation has had the reverse effect of causing a surge in yakuza loan sharking. Small businesses have trouble obtaining loans and bankruptcies are already rampant. Even now, small businesses are stressed to pay taxes due. How then can they be expected to carry an even heavier burden?

Companies will contract and go bankrupt at an ever-increasing rate and unemployment will reach unendurable proportions. In America during the Great Depression, there were entire areas of public parks with makeshift cardboard housing for the homeless. They were called “Hoovervilles” after U.S. President Herbert Hoover (who was in the White House when the Great Depression struck). The “Nodavilles” in Tokyo will increase to the point that they become cities unto themselves.

To try to offset the consequences of political and bureaucratic avarice, “monetarists” have planned to increase the money supply, a clear demonstration of the government’s lack of competence. Obviously increasing the money supply will cause inflation, creating the nightmare of “stagflation,” an economic disease that is very, very difficult to cure. Meanwhile, corruption in Japan, a far more serious problem than anything else, needs to be addressed. But it never will be at this rate.

The government needs to consider stimulus packages to help small businesses not only to survive but also to thrive. With a sovereign debt of 300 percent of GDP expected within the decade, Noda and his colleagues have their hands full. It is questionable whether any current political leader is competent enough to deal with the problems confronting Japan. Noda et al. had better hope that they have not put the Japanese economy into a death spiral.

The opinions expressed in this letter to the editor are the writer’s own and do not necessarily reflect the policies of The Japan Times.

stephen shaw

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