Japan's Future Prime Minister Fails To Mention Financial Resources
Japan's Future Prime Minister Fails To Mention Financial Resources
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In the run-up to the September 29 presidential election of the Liberal Democratic Party (LDP), the four candidates have been debating on TV programs and online, and presenting their opinions, as "When I become the prime minister of Japan...".
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For reference, here are the headlines of articles related to the presidential election from the online portals of various newspapers as of September 26.
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Nihon Keizai Shimbun:
Supporters of four LDP presidential candidates see Abenomics:
Kono, Kishida, Noda weighted toward revisions, while Takaichi seeks acceleration
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Kono 46%, Kishida 17%, Takaichi 14%, Noda 5% in LDP presidential race
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Kono, Takaichi to consider holding nuclear submarines, while Kishida, Noda cautious
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Asahi Shimbun:
Can the "100 million yen barrier" be eliminated?
LDP presidential election to focus on financial income taxation
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People are influenced by their "appearance"
Will the person in the presidential race become the "face of the election"?
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Yomiuri Shimbun:
Not found
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Mainichi Shimbun:
"What??Am I a member of the Liberal Democratic Party?
LDP voters were registered without consent, received ballots for presidential election and expressed their confusion on Twitter
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47% of LDP supporters would vote for Kono, 28% for Takaichi, 18% for Kishida
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Sankei Shimbun:
Kono: "It's fake news!" Protests Fuji program commentary
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Kono repeatedly denies influence of family businesses in policy toward China
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The historic significance of the LDP presidential election:
end to the failure to achieve economic growth targets
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Kono, Takaichi open to Japan's nuclear submarine program
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LDP presidential candidates are peeled off the plating
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Kishida sings "Body & Soul" and talks about policies to protect the weak in society
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LDP's Sato: "It's extremely rude" for Kono to reform the policy research council
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Kono retracts remarks about '"shouting at a subcommittee meeting"
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Tokyo Shimbun:
LDP presidential election:
Candidates differ on stance on elective surname selection, with major differences in their views on the family
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Articles from "LDP presidential election" section
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47NEWS:
Don't wear such clothes, call young voters ... Takaichi's support "Military strategist" Abe's true intention
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Kyodo News:
Not found
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Jiji Press:
Kono, Takaichi open to possessing nuclear submarines; Kishida, Noda negative
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Kishida ahead of Kono, followed closely by Takaichi in LDP lawmakers support
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Compete for measures to strengthen economic security
Set up minister in charge of cyber defense
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Kishida and Takaichi argue for increased investment to strengthen national land
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LDP presidential election is 'Sekigahara': Abe vs Suga, a proxy war
领英推荐
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Kono apologizes for 'inappropriate' remarks, disrespects LDP subcommittee
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It is a good thing that the presidential election has been so open. As for the news companies whose articles on the election were not found on the portal sites, it was probably just a coincidence that I could not find them at the time I looked at them. I don't want to touch on the way each company covered the issue here anyway.
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Nevertheless, what I find disappointing is that there is not much argument about the financial resources to support the policies. For example, the following.
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"On September 22, the four candidates running for the LDP presidency attended an intra-party debate dedicated to children's policy. They all agreed to double the government's budget to support families, including children, in areas where there are many issues such as child poverty, child abuse, and the declining birthrate. However, there was almost no mention of how this would be funded, and the candidates did not engage in debate with each other."
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Reference: Presidential election, what about child policy? Budget inferior to international standards, 4 candidates silent on financial resources
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The title of an editorial in a certain newspaper read something like, "The next prime minister of the Liberal Democratic Party should cut spending by 1 trillion yen a year to achieve a budget surplus."
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The more they talk about their ideal policies, the more financial resources needed to support the policies. When they have to follow the advice like, "cut spending by 1 trillion yen a year to achieve a budget surplus," the titles above, such as "owning nuclear submarines," "increased investment to strengthen national land," and "double the government's budget to support families," will end up being nothing more than empty words.
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On the other hand, it is urgent to restore the government's finances, but there is no prospect of returning to a budget surplus with spending cuts of about 1 trillion yen per year.
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For example, the average tax revenue from FY 2011 to FY 2020 is 53.7 trillion yen per year, while the average expenditure is 107 trillion yen per year. In other words, for the past 10 years, the government has been running an average budget deficit of 53.3 trillion yen, equivalent to the total tax revenue.
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As a result, the accumulated budget deficit for the period from FY 1975, when statistics are available, to FY 2020 has ballooned to 1408.9 trillion yen. If we cut spending by about 1 trillion yen per year, not only will we not return to surplus even after 1,000 years, but the accumulated deficit will continue to increase for sure.
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Reference: Trends in Japan's fiscal balance
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So, I will quote two relevant sections from my new book.
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36. Tax revenue structure of Japan
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Chart 35: Tax revenue structure of Japan (Source: OECD)
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Chart 35 compares Japan's tax revenue sources in 2017 with the OECD average for similar tax revenue sources. The blue bars are for Japan. The grays are that of the OECD average. Japan does not have payroll tax and others.
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It is important to note that Japan's largest source of tax revenue is social security contributions, which account for 40% of tax receipts in the broad sense. Social security is a generic term for medical insurance, pension insurance, nursing care insurance, worker's compensation insurance, and unemployment insurance. In other words, Japan's consumption tax, which is supposed to be a source of funding for social security, is positioned as a supplementary source of revenue. Therefore, it has become necessary to look at the balance of payments for social security expenses, which is separate from the general account finances seen in Chart 01 above. This will be discussed in the next chapter, “The Social Security System on the Eve of Collapse."
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What we can learn from Chart 35 is that when 40% of social insurance premium revenue, 21% of the consumption tax revenue, and 8% of property tax revenue are combined, nearly 70% of Japan's tax revenue is collected in a manner similar to a stable source of revenue with little fluctuation due to the economy. However, as mentioned earlier, stable revenue sources carry a greater risk of prolonging the recession by collecting taxes without mercy even when the economy is bad. On the contrary, even when the economy is good, there is no significant upside.
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In addition, when it comes to social security contributions, Japan collects more than 1.5 times as much as the OECD average. This suggests that even if we try to cut spending to restore government finances, it will be difficult without addressing the social security system.
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However, as we will see later, the social security system is already on the verge of collapse, and spending cuts are unthinkable. This means that instead of trying to reduce social insurance premium income, it is inevitable to increase tax revenue from income tax and corporate tax that have less risk of recession out of those taxes mentioned above. The reason why these two have less risk of recession is that they levy on salaries and profits resulting from business operations on a results basis.
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Then, what about Denmark, which has the highest consumption tax rate (value-added tax rate) along with Sweden, as seen in Chart 33 above?
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41. Government spending in 32 OECD countries
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Chart 40: Comparison of OECD governments' total expenditures (Source: Ministry of Finance)
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Chart 40 shows a comparison of the expenditure side of the governments of the 32 OECD countries. The red bars are those of Japan. The total expenditure of the Japanese government is 38.6% of GDP, which is below the middle rank. In addition, the Japanese government's social security expenditure is 23.6% of GDP, which is only slightly higher than the OECD average, even though it collects more than 60% of its total tax revenue in the broad sense of the word in the form of social insurance premiums. Still, the government is not cutting back on social security spending, with other expenditures at 14.9%, second from the bottom. This implies that Japan does not have enough tax revenue.
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The Japanese government, with its below-average tax revenue, naturally cannot spend much. Even so, it is difficult to cut back on social security spending, so the government is cutting back on other spending, such as education. This is one of the reasons why Japan's competitiveness has been declining.
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In terms of total expenditure, Denmark ranks fourth and Sweden the sixth. Social security expenditures are also high, with Denmark in third place and Sweden in seventh. In other words, they earn relatively large amounts and spend large amounts to create a prosperous and comfortable country to live in. On the other hand, as Japan's tax revenue peaked in fiscal 1990, it can be said that the country's tax system has destined it to be poor.
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I see the possibility that the dependence on income tax, which takes from where it can and when it can, is linked to the stability of the social security system, which gives to where it cannot, and to the well-being of the people.
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Reference: What has made Japan’s economy stagnant for more than 30 years?:
How to protect the pension and medical care systems (Arata Yaguchi: Kindle Edition)
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The reason why the four candidates for the presidency do not mention the source of funds is because they cannot say so publicly. What they have in mind is that the debt will be inflated as it has been in the past and financed by the BOJ's money supply as it has been under Abenomics. However, these debts will be paid for by confiscation of private assets, as in the past.
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The tax revenue in FY 1988 was 50.8 trillion yen, and the average tax revenue for the 31 years from FY 1989 to FY 2019, when the consumption tax was added to the tax revenue, was 50.7 trillion yen. During this period, the Japanese economy grew 1.41 times (in yen) and the world grew 4.42 times (in dollars). If Japan had grown at the same rate as the rest of the world, and if tax revenues had continued to increase under the 1988 tax system, tax revenues in FY 2019 would have reached (50.8X4.42=) 224.5 trillion yen. In reality, it was 58.4 trillion yen.
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This suggests that Japan can only be saved by tax reform.