Japan's Fiscal Problems

It hasn't been especially fashionable to talk a lot about Japan's fiscal difficulties of late. Probably a question of positive thinking. They do nonetheless continue to exist. The difficulty is, when you are still struggling to break the hold of a series of recessions which now go back over more than a decade, it's difficult to see how you can muster the energy to get the fiscal knife out. So obviously you wouldn't expect them to do it. And they aren't planning to. The brunt of Japan's new tax reform will consist of a battle against evasion, and to up the % of Japanese who pay tax. Meantime the FT article with this significant news does tell us that govt debt is now running at 160% of GDP - the last time I saw a number it was at 150%, but on this scale I suppose the odd 10% increase here and there is relatively small beer. Until, of course, the day it isn't.

Japan's tax commission on Tuesday proposed a radical overhaul of income tax as early as next year in an effort to repair what it considers the country's dire fiscal position.

With the fiscal deficit running at more than 5 per cent of gross domestic product before debt interest payments, the influential commission is proposing sweeping changes aimed at limiting avoidance and bringing more people into the tax net.

Hiromitsu Ishi, commission chairman, told the Financial Times that immediate improvement of tax collection was needed if Japan was to meet the challenge associated with a rapidly ageing society.