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Japan's antidote to depression
By Paul Abrahams in Tokyo
<Picture: Japan>Milton Friedman would be amused. The Nobel prize winning economist, who once joked that the fastest way to boost money supply was to throw dollar bills out of helicopters, may soon see a variant of this idea put to the test.
The Japanese government said yesterday it was considering plans to hand out ¥30,000 (£130) gift vouchers to every one of the country's 125m inhabitants.
The government is also considering a "Happy Monday" scheme, which would turn an increasing number of Mondays into holidays in a bid to persuade consumers to go shopping instead of going to work.
These are desperate times in Tokyo, as the government seeks to head off what some economists believe is an imminent depression.
Yesterday, the Nikkei average of 225 leading shares fell another 2 per cent to 12,948, its lowest since January 1986. Today, the government is set to cut its forecast for gross domestic product this financial year to minus 1.8 per cent. A few months ago, it was predicting 1.9 per cent growth.
The economics of the gift voucher scheme are perhaps a little more rational than those of Friedman's free dollar bills. Like more orthodox methods of stimulating an economy, such as printing money or cutting taxes, recipients of the dollar bills could choose to save the benefit rather than spend it immediately. But because the vouchers would have a limited shelf life, people would have to spend them quickly, giving a fast, if ultimately illusory, boost to the economy.
The political rationale for the scheme is that it has been championed by a marginal political party, Komei (the clean government party). By embracing Komei's idea, the ruling Liberal Democratic party, which failed to win an absolute majority in last July's elections, might win the support of the party for passing other legislation.
Perhaps the political benefits will even outweigh the economic one. Yesterday, economists suggested the effect of the vouchers would be a boost to the economy of only ¥3,750bn, or 0.7 of a percentage point.
Robert Feldman, economist at Morgan Stanley, said: "What they need to do is more drastic; say, abolishing central government income tax, which would provide a boost of ¥19,000bn to the economy. |
