Re: Japan and global demand (consumption and saving)

[Clifford Poirot <cpoirot@xxxxxxxxxxx>]

My understanding is that one of the reasons for the high Japanese savings
rate is the absence of consumer credit mechanisms. Also, Japanese pensions
and social security are much lower than in the U.S. These would seem to be
two areas in which the Japanese could stimulate domestic demand.

-----Original Message-----
From: PHILIPPE BURGER [mailto:mwburgph@xxxxxxxxxx]
Sent: Monday, March 19, 2001 1:56 PM
To: Kazuhiro Kurose
Cc: PKT
Subject: Re: Japan and global demand (consumption and saving)



Hi Kazuhiro,

I agree, saving does not have a causal role and is a residual.  My focus is
actually on consumption as a causal factor.  The tax could cause consumption
to have a larger causal role (increase the autonomous component of
consumption, or alternatively help to increase the MPC).  In other words,
cause the residual to be less.  (My idea is certainly not mainstream, as the
mainstream argument would be that higher, not lower saving is necessary to
spur investment).

My original idea does not stem really from the Tobin tax issue.  Rather it
stems from the tax that some countries imposed on unused agricultural land
or unused mineral rights to spur the development of these resources.
Lastly, I think Paul Davidson is right on the similarity between this idea
and the stamped money idea of Gesell.  My question is just (and it is really
a question as I dont know the Japanese scene well) whether there are at
present close substitutes for money in the Japanese case that have a high
liquidity premium attached to them?  I dont think domestic bonds or property
would fall in this class, but maybe foreign instruments might qualify. Even
the US treasury bills which many see as a very safe asset, is drying up with
the reduction in US public debt.   Lastly, I did not see this tax as "the"
solution.  I guess there are many issues that need to be addressed, like how
to switch existing production techniques to the production of consumption
goods demanded domestically and addressing the political issues and so on -
If it was as easy as one solution, I guess they would not have been in
trouble for a decade.


Best wishes
Philippe

>
> Japanese economy has several characteristics, especially compared with US.
First is the component of national income.
> Japanese share of consumption to national income is relatively lower and
that of investment is relatively higher.
> Therefore, it is said that Japanese must dissave and consume much more. I
think that what Philippe said is also like
> that. However, I'm always confused, everytime I hear the statements like
that. For from a Keynesian perspective, saving
> is just residual, and has no causal role. It is investment and consumption
that have a causal role. But what Philippe
> said admits saving to have a causal role in the determination of national
income. It seems to me that this account is
> not Keynesian style.
> Therefore, I think that if one would like to argue on consumption, one
must pay attention to investment, not saving.
>
>  **************************************
>   Kazuhiro Kurose
>   Graduate School of Economics and Business
>   Administration, Hokkaido University
>   Kita 9 Nishi 7, Kita-Ku, Sapporo, Japan
>   060-0809
>     TEL: +81-11-716-2111 ex:2786
>  **************************************
>