An Eccentric Thought – Should Japan Formally Monetize Much of Its Debt

An Eccentric Thought – Should Japan Formally Monetize Much of Its Debt Background: A. Japan has a stagnant economy; low or no inflation; and is talking about raising taxes on consumers; and, it has very high corporate taxes. B. The Japanese central bank has already been buying-in substantial amounts of government debt. Options: 1. Japan wants to grow its economy but it is actually talking about further increases to taxes to service its debt (note: most of this is principle only as interest rates are so low). 2. What would happen if Japan dropped its tax rates (sales and income) and monetized it (i.e. have the Japan Central Bank write the debt off)? Considerations: While in the early 1980’s US, the Federal Reserve worried about having to ‘start’ to monetize US debt to be able to fund the government, it never did so – back in the 1980’s. Since the 2007/08 financial crisis, the Federal Reserve has essentially monetized several trillion dollars of US debt – what were the negative consequences that were feared (i.e. inflation) and what happened (i.e. no inflation). Individuals and businesses in the US frequently resort to bankruptcy to restructure and regrow. We have countries, like Japan, having a growth deficit. Should they consider their own bankruptcy (i.e. the monetizing of substantial amounts of Japanese debt). Summary: We appear to be in a different economy and long ago the US recognized that rather than debtors’ prison, it was better to restore economic vitality. Yes, other policy changes (i.e. reduced government spending may be very important) may be vital; but, take the burden of taxes off of individuals and businesses.