deflation japan falling prices growth

Japan prices fall, mild deflation to
quality of life becker single tax wales land value tax drakeford

Welsh AM Mark Drakeford -- Land tax is fairer

To figure out how to have the economy serve us, one must wade thru much nonsense, yet one leader did nail something sensible. We trim, blend, and append five articles from: (1) Reuters, 2012 Jan 26, on deflation by K. Kaneko; (2) Guardian, 2011 May 27 on inflation by J. Kollewe; (3) Wa-pedia (Wa is a Chinese character for Japan), 2010 March on quality of life; (4) Becker-Posner Blog, 2012 Jan 29 on land tax by G. Becker; and (5) on a labor leader as a video at the BBC, 2012 Feb 1 and the article at WalesOnline, Feb 3, by D. Williamson.

by Kaori Kaneko, by Julia Kollewe, by Wa-pedia, by Gary Becker, and by David Williamson

Japan's core consumer prices fell for the third consecutive month in the year to December, and mild deflation is expected to persist this year as energy prices stabilize and worries about Europe's debt crisis suppress wage growth and economic activity.

Core consumer prices declined an annual 0.1 percent, a sign that Japan continues to grapple with a strong yen, which pushes down import prices and makes exporters reluctant to raise salaries.

Retail sales fell 1.2 pct in 2011, the first fall in two years, and auto and machinery equipment sales posted record falls in the series, which dates back to 1980. But sales rose an annual 2.5 percent in December, the biggest increase in 16 months.

Overall consumption is relatively firm partly supported by reconstruction demand. Europe's downturn could offset the economic benefits of rebuilding the country's earthquake-damaged northeast coast.

Japan's consumer inflation has been around zero or minus for over a decade, except a 1.5 percent rise in 2008 on the back of an increase in energy prices.

To see the whole article, click here .

JJS: “Persist”? Why cast falling prices in a bad light? The press, the economists, and the lenders and investors all want prices to rise so badly, they even accept them when it’s a disaster that pushes up prices. Even the leftist press cheers (“overcomes”) a higher cost of living.

Japan has overcome deflation for the first time in more than two years, but only because of food and energy shortages caused by the tsunami.

Japan has been battling deflation, or falling prices, for more than a decade. With Japanese consumers reluctant to go out and spend, deflation became entrenched in the late 1990s. A healthy economy needs to have a modest amount of inflation to keep growing. When prices are falling, consumers and businesses spend even less because they wait for things to become cheaper.

Consumer prices rose after fuel imports surged following the nuclear crisis. Higher energy costs pushed prices by 0.3% in April from a year ago.

The devastation caused by the earthquake and tsunami has pushed Japan's economy, the world's third-largest after the US and China, back into recession, with GDP down 0.9% in the first three months of the year, the second quarter of contraction. Factory production and consumer spending both suffered record falls in March.

The Bank of Japan is expected to ease borrowing. It discussed the possibility of expanding an emergency lending program [of money that never existed before] to quake-hit banks at a meeting at the end of April when it left its key lending rate near zero.

To see the whole article, click here .

JJS: If growth = health, then is a cancer healthy? Is spending money the point of life? Are we to serve the economy or is the economy to serve us? Since Japan has had deflation for so long, just how far has their sky fallen? Or have negatives like pollution fallen and the quality of life risen? Why don’t economists ever answer that? Probably because they never ask it.

The United Nations Development Program created a composite Human Development Index taking into account life expectancy, education, and GDP to assess a nation's human development. The 2009 Report gives Japan a score of 0.960 corresponding to a very high human development. Japan ranks as the 10th most developed country in this regard, sandwiched between Switzerland and Luxembourg.

According to the United Nations and the CIA World Factbook, Japan's life expectancy is the highest in the world. Obesity (Excel) is the lowest among OECD countries along with South Korea. However Tobacco consumption (PDF) is the 3rd highest of OECD countries after Turkey and South Korea.

According to the World Health Organization, Japan has the 4th highest female suicide rate in the world after Sri Lanka, China, and South Korea. Japan's male suicide rate is still the highest among rich nations, although Russia, Belarus, Ukraine, and Lithuania have higher rates.

As of 2009, Japan was listed 16th by the International Monetary Fund and 18th by the World Bank and the CIA World Factbook in terms of nominal GDP per capita (ranging from $38,443 to $39,700). When adjusted for purchasing power parity (PPP), Japan ranks respectively 24th, 18th and 29th.

Japan's GDP per capita at PPP is almost exactly equal to the European Union's average. It is worth noting that the GDP per capita in the Tokyo Metropolitan Area is about twice higher than the national average, due to the concentration of major companies' headquarters and governmental organisations. A similar phenomenon can be observed between London and the rest of the UK, although not in more decentralised countries like Germany or Spain.

The Gini coefficient is used to measure the inequality of income or wealth. The CIA World Factbook gives Japan a Gini coefficient of 38.1 (in 2002), while the United Nations estimated it at 24.9 in 2008. These are very different figues. The UN makes Japan the country with the lowest income inequality after Denmark. The CIA assesses Japan to have greater income inequality than India (!) and far more inequality than the EU. By the OECD's calculations, the Japanese Gini coefficient in the mid-2000's was of 44 before taxes and transfers and 32 after taxes and transfers.

The CIA Factbook's public debt ranking shows that Japan's public debt in 2009 was 192.10% of its GDP, the second highest figure in the world after Zimbabwe. Among Western countries, the highest figures are for Italy (115.20%), Greece (108.10%), Belgium (99%) and Iceland (95.10%). Other Western countries stand between 7.50% (Estonia) and 80% (France). The UK's public debt is 68.5%, while the USA's is 40%.

To see the whole article, click here .

JJS: While many economists can say “the economy is doing better eventho’ the people are suffering” (an actual quote), some do know better. And some know about a reform that marries economic health and social health -- the public recovery of socially-generated land values in lieu of taxes on labor and capital.

Henry George in his book Progress and Poverty (1879) made a famous proposal for a wealth tax in the form of a 100% tax on increases in the value of land. This single tax, he believed, could replace all other taxes. George argued that a land tax was a good tax because, so he claimed erroneously, the value of land did not depend on what landowners did, but rather depended only on forces like population growth that were beyond their control.

To see the whole article, click here .

JJS: While the author above did well to know of the tax on land value, he did poorly to take it out of context. At the time that George wrote, it’s quite conceivable that a tax falling only on surface land could have sufficed then to fund all breadths of government in the US, from federal to local. And when you use the word “land” technically, as economists do, it includes natural resources, the EM spectrum, ecosystem services, etc. If government were to recover all that, it’d have trillions, probably enough for today’s spendy governments.

Plus, if governments were to also recover the full value of the privileges they issue -- utility franchises, patents & copyrights, corporate charters, etc -- by charging full market value for each such permit granted, then governments would easily have so much revenue, it’d be an embarrassment of riches and they’d have to pay citizens a dividend, a la Alaska’s oil share.

Encouragingly, one member of one government calls for such a fair and fundamental reform.

Welsh Labour AM Mark Drakeford has given his backing to a “land value tax”.

The Cardiff West AM’s championing of the tax comes as the Silk Commission investigates giving the Assembly new fiscal powers.

In an article for the Institute of Welsh Affairs, Mr Drakeford argues land should “should belong to the people” and this would be a progressive tax.

He writes: “In Wales -- the part of the United Kingdom with the longest tradition of radicalism -- we have no difficulty in understanding the notion that land is a resource we share in common, a true ‘common wealth’. As a result of being fixed and fundamental, it should belong to the people.

“Those who have the privilege of ownership should pay something back for that privilege, through a Land Value Tax.”

“Of course, it would be an alternative to existing forms of taxation, not an addition to them.”

To see the whole article, click here . To see a video of the AM, click here , called, “Short debate: A Land Value Tax for Wales?” on Feb 1.

JJS: May every land have such a leader.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

China, Inflation & Gold -- and Trade

When Gross Domestic Product rises, rejoice?

Better Governance: A Case for Parliamentary Systems

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