The Japanese government says it needs money to spend on the "recovery" from the earthquake/tsunami of March 11.
Well, part of that money has been found, and will be spent without consent from the stakeholders: 2.5 trillion yen (29.4 billion dollars) out of the public pension.
The ruling party politicians are squabbling over which pet projects need to be cut in order to fund the remaining 0.5 trillion yen (less than US$6 billion), but the bulk of the funding seems now secured. It's just very easy to take money away from the party with no clout - the general public, and it is the same in Japan as well as in the US.
Kyodo News (4/6/2011) reports:
The government plans to craft an extra budget of more than 3 trillion yen by mid-April, without relying on bond issuance, to finance measures to help reconstruct Japan following last month's deadly earthquake and tsunami, a blueprint for the budget showed Tuesday.
Around 2.5 trillion yen for the first extra budget for fiscal 2011 will come from funds initially secured to enable the government to maintain the level of the state's contribution to basic pensions at 50 percent, according to the blueprint, a copy of which was obtained by Kyodo News.
The rest will be generated by scrapping some of the Democratic Party of Japan-led government's key policies under the initial budget for the year starting April, such as increasing monthly child allowances and introducing more toll-free highways, the draft said.
The government had considered drawing up a first extra budget of not more than 3 trillion yen, but it is now seeking to spend slightly over 3 trillion yen, it showed.
However, the government will face a difficult process in working out the current plan, partly because some DPJ lawmakers remain opposed to scrapping some of the major policies.
The extra budget will mainly finance the costs of clearing rubble and building temporary housing, restoring public facilities and infrastructure, and creating jobs, the paper showed.
The government will try to submit the first supplementary budget to the Diet before the so-called Golden Week holidays begin April 29.The emergency spending will most likely be followed by second and third batches, and total expenditures could top 10 trillion yen, according to DPJ lawmakers.
10 trillion yen (US$118 billion)? Who are they kidding?
That's about how much they spent for the recovery after the Kobe earthquake in 1995.
Japan's GDP is about 430 trillion yen (US$5.07 trillion). Do they think they can get away with spending only 2.3% of GDP to recover from the biggest, on-going (remember Fukushima I Nuke Plant?) disaster?
It is my personal opinion that Japan will end up spending 10 to 20% of GDP. In other words, up to $1 trillion, or 85 trillion yen. Probably not in a single year, but over the next few years total.
Kyodo's article says that the pension benefits won't be affected, but that what a government, any government, will say in the beginning. According to Asahi, Minister of Health, Labor and Welfare Ritsuo Hosokawa has already admitted the possibility that the future benefits may be decreased if the government cannot find the alternative funding for the pension contribution.
I have better ideas.
Japan is sitting on the pile of over $800 billion of US Treasury notes and bonds.
It is also a sovereign nation with its own currency. Haven't they learned yet from Ben Blackhawk Helicopter Bernanke? The government and Bank of Japan have always wanted to create inflation for the past 20 years, and these days even the citizens are thoroughly conversant with the Keynesian thinking of "deflation is bad, inflation is good". Here's your chance on the printing machine.
I would personally use that pile of US Treasuries first before digital printing of yen to delay the onset of high inflation.
At this point in time, it doesn't seem remotely possible for the Japanese to not rely on the government at all levels, even if that reliance wasn't justified, as well evidenced in the past 4 weeks. So there's little point in even suggesting a libertarian, capitalistic way to recovery.
(Never say never, though. I have seen a good evidence of some Japanese people realizing they have to take care of themselves, and not relying on the authority. Heresy!)
Too bad the Japanese people haven't been too keen on buying gold and silver. They should have learned from Chinese, Indonesians, Indians, and other wise Asians who have been buying gold to preserve their wealth.