Japan disappoints

It looks like Japan is playing games with how to distribute the cash benefits from their newly announced stimulus program. They had promised $20 billion to be spread among all the households in the country.

Yesterday's announcement that the government doesn't plan to set income cap limits for payout eligibility seems innocuous. But when Prime Minister Aso added that he preferred that high income earners voluntarily decline to file applications with municipal governments, I smelled trouble.

Without an income cap indicator, middle to high income earners are going to be put in a bind. Culturally, it would appear unseemly for them to show up at their municipal government office looking for a handout. This is unfortunate and will severly lessen the impact of the stimulus. This middle ground of earners are exactly the group who would spend the extra cash and impact domestic growth. The plan had meant to distribute 2 trillion yen into the economy by giving 12,000 yet to each adult and 8,000 yen to those under 18 or over 65.

And Japan could use the stimulus. Despite a large amount of cash reserves, imports have surged past exports. Imports are largely affected by oil as Japan is nearly 100% dependent on oil imports.


According to the NY Times (11/10), "exports to the United States dropped 10.9 percent and those to the European Union also fell 9 percent in September. Asia-bound shipments grew just 2.8 percent in the month. Exports alone account for about 18 percent of Japan's economy."




http://www.yomiuri.co.jp/dy/national/20081111TDY01303.htm
http://www.washingtonpost.com/wp-dyn/content/story/2008/10/30/ST2008103001994.html