Japan threatens to bankrupt state
If it does not take the bull by the horns, Japan will end as Greece. The policy speech delivered yesterday by the new Prime Minister, Naoto Kan, before Parliament is clearly intended to create a shock.
"Like the problems in the euro area caused by Greece, there is a risk of collapse if we do nothing against the rising public debt and consequently lose the confidence of bond markets," Has he said. Japan's debt exceeds 200% because of GDP (gross domestic product) and threatens to reach 246% in 2014, according to the IMF.
In reality, there is no chance that the archipelago is found in the situation in Athens, since this debt is 95% owned by Nippon investors and long-term rates remain very low, but feared the reaction of Tokyo rating agencies.Last January, Standard and Poor's downgraded the rating of its long-term debt from "stable" to "negative".
Naoto Kan, who can count on the support of 61.5% of the population, according to a poll conducted Wednesday, draws a line over ten years of economic policy that has led the country to choke.
He wants to go fast and run a complete overhaul of the tax system by initiating a national debate beyond partisan barriers "to ensure the support of the opposition. The economic recovery of the archipelago, with an annualized growth of 5% in the first quarter, giving him the means.
Deflationary
But this reform is likely to be painful because it requires an increase in VAT, currently at 5%, one of the lowest in developed countries. Can not kill it in the bud the recovery of consumer confidence recorded in five months? "I do not think so.The VAT could double, but that should not weigh. When households are too indebted state, they are slowing their purchases. If they have a visibility they consume more, "said one investment banker in Tokyo. He added that such measures can help break the spiral of deflation, which, "by dint expect further declines in prices affects consumption."
The government, which wants to reduce unnecessary government spending, is preparing in parallel to reduce the corporate tax, which at 40%, is one of the highest of OECD countries. This would allow companies to offer cheaper products, thereby reducing the impact of the tax increase on consumption.
"It's courageous," says a French financial analyst living in Japan.And Naoto Kan, for once, can rely with confidence on the new Minister of Finance, Yoshihiko Noda, firm believer in fiscal discipline.
Only downside, the prime minister can not deny the social promises made during the campaign of his party. But they are expensive. The only allowance for children continuing their studies, launched in the spring and intended to fight against the declining birth rate, represents 45 billion euros per year. And the Minister of Social Affairs, Akira Nagatsuma suggests it could take another form as a cash payment to families. But "when we preach the rigor of educational way, the Japanese understand perfectly," decide the investment banker, who took the gamble that the revolution Kan prevail.