Questionable Economic Measures

Considering constantly low rate of public support for his administration, Kishida ordered the members of his Cabinet to deliver a new package of economic measures on Wednesday, which was focusing on wage growth of the people in the time when the inflation damages households. However, the measures are mainly dependent on subsidies. New subsidy requires new budget. Sowing money as economic measure did not work well in the past administration. There are speculations on his intention.

According to the outlines explained by Kishida, the measures consist of five pillars: protecting people’s lives from inflation, sustainable wage growth, promotion of domestic investment, overcoming demographic decline and enhancement of safety and security. Among them, measures for sustainable growth are most paid attention. Kishida looks like embarking on the reform of pension and health insurance system.

 

There is a traditional hazard called “the walls of ¥1.06 and ¥1.30 million.” There is a rule in Japan that a worker who earns yearly ¥1.06 million or more has to pay for his/her own pension and health insurance. A worker with yearly ¥1.30 million or more is no longer a dependent family of the spouse, who earns main income of the family, and has to pay for pension and health insurance. That is why a certain number of people do not want to work more than the limit.

 

Kishida is offering some subsidy for the workers beyond the limit of ¥1.06 million, and two-year moratorium on the rule of losing the status of dependent family. While those measures are aimed at increasing wages of each family, its effect can be questionable because they are temporary measures and the Japanese tendency of saving money. In the time of introducing new rate for consumption tax in 2019, Japanese government disseminated commercial coupons, but its economic effect has not confirmed.

 

To maintain economic activities in pandemic, the government of Japan has been expanding its spendings with consecutive supplementary budgets. Bank of Japan sees that “Japan’s economy is likely to continue recovering moderately.” It may be the time to explore the exit. The fundamental question is whether Japan needs these economic measures, which may cause a certain amount of additional government bonds.

 

Kishida even indicated a possibility of tax reduction. “Now, we have to properly return the increased tax revenue, which is our achievement of growth, to the people,” said Kishida in his press conference. That expression invited a speculation that Kishida was considering a snap election to maintain his administration by the end of this year. However, there is no sign for Kishida’s approval rate, which is the key index for the decision of election, to boost steeply with applauses for the economic measures. As discussion over financial resources for the policies like security enhancement or child care is accumulated by the end of this year, Kishida’s support can rather decline eventually.

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