Thursday, January 17, 2013
Another Japanese Stimulus on the way
Now that there is a new government in Japan, all they had to do is to have another huge stimulus package in place and see the things start rolling. Will it help only time will tell but based on the several previous stimuli that various governments have enacted with little to show for it, you can bet that this one will also end up the same? I don’t see any special provision that it would be successful in any immense way except that it will add to the huge debt that Japan has now equaling more than twice their GDP and growing very fast. As I said it before that the most important issue facing Japan is the demographic decline and unless the immigration is opened up there would be less people to support an aging population. I can understand the hesitation of Japan to open up immigration because of their small country and ambivalence to foreigners but is there another way to fight this thing. You can argue that the population can be increased by giving incentives to people to have more babies but you cannot force them to have it if they feel that it will be a huge burden to take care of them. This cultural trend towards fewer babies is evident in every major industrialized country but Japan is particularly vulnerable to it since their population is declining and aging faster than any industrialized country in the world. To spend the stimulus on public works projects will indeed create some economic activity and jobs but how long it will last and how much it will have a long lasting effect on the economy remains to be seen.