The Bank of Japan thinks Japan may hit its 2% inflation target in 5 years. Kuroda says risks are to the downside.
It may take Japan five more years to reach its 2% inflation target according to BOJ governor Haruhiko Kuroda.
“Sometime within the next five years, we will reach [our]2 percent inflation target,” Governor Haruhiko Kuroda told CNBC’s Sara Eisen over the weekend. Once that level is reached, we will start “discussing how to gradually normalize the monetary condition.”
Mish’s Four Pronged Proposal to End Japanese Deflation
- Negative Sales Taxes
- One Percent Tax, Per Month, on Government Bonds
- National Tax Free Lottery
- Hav-a-Kid
Negative Sales Taxes
People hoard cash, especially the miserly wealthy. We need to unlock that cash and put it to work.
To free up this money, I propose negative sales taxes. The more you spend, the more money you get back as a direct tax credit against income taxes.
I leave specific details to economists Larry Summers and Paul Krugman.
What can possibly go wrong?
One Percent Tax Per Month on Government Bonds
Negative interest rates are in vogue. However, all negative interest rates have done is to get those with money to hoard bonds.
Bond buyers effectively bet on capital gains of still more negative rates.Phooey! Makoto Yamashita, a strategist for Japanese interest rates at Deutsche Bank AG’s securities unit in Tokyo said“There are investors who have no choice but to buy.” We need to end this “no choice” hoarding sentiment right here, right now.
I have just the solution. Tax government bonds at the rate of 1% per month. No one will want them. Hedge funds and pension plans will dump sovereign bonds en masse. This will allow governments to buy every bond in existence immediately, if not sooner. As soon as the government corners the bond market (at effectively zero cost), debt and interest on the debt will truly be owed to itself.
Once the bond market is 100% cornered, I propose government debt be declared null and void annually. This would effectively wipe out the entirety of Japan’s debt.
Japan’s debt-to-GDP ratio would immediately plunge from 250% to 0%.
National Tax Free Lottery
Japan desperately needs to get people to spend, continually.
Once again, I have a logical proposal. For every purchase one makes on a credit card, that person gets a free lottery ticket for a weekly drawing worth $10,000,000 tax free.
Each week, a random day of the week is selected and separately a random taxpayer ID is selected.
If the person drawn made a credit card purchase exceeding $10 on the day of the week drawn, they win $10,000,000 tax free. If there is no winner, the amount rolls over.
This beautiful plan will cost no more than $520 million annually, peanuts these days.
Hav-a-Kid
Demographics in Japan are a huge problem. Although various incentive have been tried, none of them have gone far enough.
I propose a reduction in income taxes for everyone starting a family. The following scale applies.One new child: 50% reduction in income taxes for a period of ten years. Two new children: 100% reduction in income taxes for a period of twenty years. Three new children: Subsidized housing, free healthcare, free schooling, and no income taxes for thirty years.Those with one new child in the last five years get full credit if they add at least one more child in the next five years.
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Guarantee I absolutely guarantee my plan will end deflation in a jiffy.No one will be in Japanese bonds so no one will be destroyed holding them.All Japan has has to do is print the money to pay for any tax shortfalls. After all, interest is truly owed to itself. Curiously, once the bond market is cornered, Japan can reinstall negative interest rates, effectively paying itself money on bonds before it wipes them out in debt revision procedure annually.
Literally, this scheme pays for itself.
Inflation remains low
Japan reported its consumer price index, excluding fresh food and energy, rose half a percent in the 12 months through March.
“In order to reach [our]2 percent inflation target, I think the Bank of Japan must continue very strong accommodative monetary policy for some time,” Kuroda added in his interview with CNBC.
Protectionism, unexpected rapid tightening of monetary policy in some countries, and geopolitical tensions in North Korea and the Middle East pose potential risks, Kuroda said.
It’s pretty amazing how Japan has failed to destroy its currency despite decades of trying. Once again, I repeat my foolproof plan to cure low inflation in Japan.
This article has been republished with permission from Mish Talk.