Indigestion

The problem with socialism is always not enough socialism. More control by elites will fix everything!
- Glenn Reynolds

ONE ENGLISH-LANGUAGE publication in Japan is offering journalism in a new form. Instead of the classic inverted pyramid, it is presenting a sandwich in the hope that readers will focus on the supersized bread and not the microscopic slice of meat.

The first slice of bread

Waseda Professor Noguchi Yukio is concerned about the poor state of Japan’s fiscal health:

There is little hope…Japan’s fiscal conditions are so bad, it can no longer be fixed without causing inflation. I’m very pessimistic.

He brings up the possibility of hyperinflation, similar to that which occurred in the immediate postwar period.

I can’t tell exactly what will happen (this time), but what actually happened after the war was that the price level surged 60 times in just over four years. If the same thing happens again, a ¥10 million bank account will have the same net value of just ¥100,000 today. It’s actually possible.

Prof. Noguchi is described as one of the few in Japan who foresaw the collapse of the economic bubble in the late 1980s.

The sandwich content

The publication then presents excerpts from an 8 February editorial in the Financial Times titled, Japan’s Debt Woes Are Overstated.

Talk of a massive JGB bubble — let alone default — is far-fetched… Ninety-five percent of Japan’s debt is domestically owned. Fickle foreigners have almost no sway. Indeed, Japan’s problem is still an excess of savings…For some time yet, the government will not find it hard to secure buyers for JGBs. Japan’s debt problem will be worked out in the family.

The inclusion of this brief excerpt is what’s known in the journalism biz as “balanced reporting”.

The condiments

But “not to worry” isn’t the point of this exercise, so some condiments will have to be added lest the reader be reassured.

“Most experts”, it is said, claim that Japan’s midterm outlook is “shaky”. One cited is the International Money Fund.

A closer examination shows, however, that the IMF report says that if present trends continue, the country will have to start looking outside its borders for bond purchasers. In 10 years.

The results indicate that domestic financing will likely become more difficult toward 2020, while other sources of fundings are available, including from overseas.

The second slice of bread

Now that they’ve got their readers alarmed, they serve the part they really want them to swallow. The publication quotes another professor, this time Sakuragawa Mayasa of Keio University. He conducted a “simulation” on the nation’s debt.

He thinks Japan will be insolvent in about 10 years unless it raises the consumption tax to 15%. And what does he think will happen then?

The possibility is high that panic like a run on banks would break out. People would try to withdraw their money, but banks would go insolvent because they wouldn’t have enough assets anymore.

Fortunately, however, there’s some cause for hope:

So the scenario that I hope will happen is that Japan will face a minor crisis first, and the people will finally realize that a government bankruptcy will have a catastrophic impact on them…Basically, Japanese people are good (at grasping situations). So they will eventually be willing to accept a rise in the tax.

Yes, the Japanese people are so intelligent they will come to realize that tripling the rate of confiscatory taxation will be both tasty and economically nutritious.

The professor even thinks his simulation is “not realistic” because it assumes “the social security budget won’t drastically expand, interest rates will remain low, and the economy will keep growing at an annual pace of 1.5 percent.”

What are some of the linguistic spices sprinkled on this dish? Take a look, and try not to gag:

* “GOVERNMENT DEBT CRISIS”

* “Bubble prophet fears new disaster”

* “soaring public debt may bankrupt Japan, bring back hyperinflation”

* “the doomsday prophet is making another terrifying prediction”

* “Japan is likely to be devastated by a snowballing public debt that will bankrupt its government and trigger catastrophic hyperinflation.”

There is another way out for people who find this sandwich unappetizing, however. Send it back to the kitchen, leave the restaurant, and never return.

Of course there’s a solution that doesn’t involve raising taxes–It’s not spending money you don’t have to begin with.

Is there any mention in this piece anywhere of downsizing government? Not launching expensive redistributionist programs like the child allowance? Eliminating not just programs, but entire agencies and cabinet ministries? Not renationalizing Japan Post? Slashing the corporate tax? Revising the bankruptcy laws?

Putting any of these possibilities into the professor’s “simulation” and seeing what effect that would have?

Hah!

Is there any mention at all that the DPJ-led government has grabbed the steering wheel and turned the car into the direction of the brick wall?

Of course not. The only criticism of anyone in government is that directed at Koizumi Jun’ichiro for not raising the consumption tax sooner–despite leading the only government that even tried to get a handle on public expenditures.

The publication even tries to pretend that Finance Minister Kan Naoto knows what he’s talking about.

What is the only greasy-spoon, English-language publication in Japan that would try to feed you this slop and call it a meal?

Three guesses and the first two don’t count.

Those with a more discriminating palate might consider trying some of the cuisine from Chef Hayek–for breakfast, lunch, or dinner.

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