Thursday, October 30, 2008

"the 5 per cent consumption tax after three years in order to avoid leaving a huge bill to future generations."

Check out this stimulus plan in Japan in the FT:

"Taro Aso, Japan’s prime minister, on Thursday unveiled a Y5,000bn ($50.8bn) economic stimulus package, the second in two months, warning of the damaging impact the global credit crisis would have on the world’s second largest economy.

“A storm that comes once in 100 years is raging,” Mr Aso said of the global financial turmoil."

More weather comparisons.

Okay. $50 billion more.

“We can’t wait for the typhoon to pass,” Mr Aso said."

More weather comparisons.

Check out what's on tap:

"In an attempt to deflect criticism of fiscal irresponsibility, Mr Aso pledged not to issue deficit bonds to pay for the stimulus package and said he wanted to raise the 5 per cent consumption tax after three years in order to avoid leaving a huge bill to future generations."

1) In 3 years, 5% consumption tax. I assume that's what it means. ( Very interesting. A time-line for debt and deficit reduction. But will it defeat stimulus )
2) Cash to people: $600 for a family of 4 ( Not much. Same problems as here. Might be saved )
3) Increase tax breaks on mortgages ( This is interesting given bubble fears going forward )
4) Highway tolls reduced ( Not much )
5) Increased money for banks ( Maybe )
6) Loan guarantees for smaller businesses ( Won't work )
7) B of J reduces rates ( Problematic going forward )
Problems:
A: Too small to impact GDP ( True )
B: Tax in 3 years might cause people to save rather than spend ( True, in Japan )
C: Since yen is rising, reduce dependence on exports and resources ( Good luck )
D: It's a political move, not economic ( So what? )

We can compare this with other plans in other countries.

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