Once the global economy rolls over into contraction, the tide will recede and Japan’s fiscal and monetary bankruptcy will become painfully apparent.
What do you get after 25 years of stagnation and Keynesian Cargo Cult monetary stimulus? A failing state, that’s what. The intellectually bankrupt ruling Elites of Japan have no solution for Japan’s slow stagnation, as real reform would diminish their wealth and power.
So their only “solution” is to double-down on monetary stimulus: flood the enfeebled Japanese economy with more credit and fiscal stimulus, a.k.a. building bridges to nowhere:Â Japan’s Monetary Pearl Harbor.
But reality isn’t as immobile as failed policies. While Japan’s ruling Elites fiddled away the past 25 years propping up sclerotic cartels and phantom loans, Japan’s population has aged and its primary sources of wealth creation have atrophied.
We can see these trends in Japan’s national budget. Before we dig into the numbers, we need to note that Japan’s Ministry of Finance routinely announces an austerity budget for the next fiscal year around 92-95 trillion yen (TY), and then supplemental spending during the fiscal year pushes actual expenditures up to 100 TY.
According to Highlights of the Budget for FY2013/2014, the initial 2013 budget was 92 trillion yen, while the actual 2013 spending came in 10 trillion yen higher, at 102 trillion yen.
According to Japan’s government looks to trim budget deficit, the national budget has hovered around 100 trillion yen for years.
So we have to take these 2013 spending estimates as lowball estimates that are 5%-10% below actual spending.
REVENUES: 92.6 trillion yen
Tax revenues: 43.0 TY
Other revenues: 4.0 TY
Government Bond Issues (borrowing): 42.8 TY
EXPENDITURES: 92.6 TY
National Debt Service (interest & bond redemptions): 22.2 TY
Social Security: 29.1 TY
Other: 41.2 TY
Debt service and Social Security are 120% of tax revenues. In other words, tax revenues don’t even cover debt service and Social Security.
