Disaster Upon Disaster – Japan’s Inevitable Plight

While Japan’s quake is a disaster of enormous proportions, it pales in comparison to its impending fiscal tsunami. Bloomberg writes

Prime Minister Naoto Kan is also preparing a fiscal response, deploying about 200 billion yen left over from the budget for the fiscal year ending March 31 and planning a supplementary budget. Finance Minister Yoshihiko Noda said it would take beyond the end of this month to compile the additional package.

Opposition leader Sadakazu Tanigaki told reporters in Tokyo yesterday he proposed to Kan a temporary tax to help fund the relief effort, and Chief Cabinet Secretary Yukio Edano said later that such a step cannot be ruled out.

The central bank set up a task force after the temblor, and pledged in a statement March 11 to ensure financial stability and said it will do everything it can to provide ample liquidity. The BOJ extended 55 billion yen to lenders over the past two days to ensure cash was on hand for withdrawals by survivors.

[Finance Minister] Noda said the nation’s growing debt load would not impede its rescue effort. Standard and Poor’s downgraded Japan’s credit rating to AA- in January and Moody’s Investors Service lowered its outlook on the nation’s Aa2 grade to negative from stable last month.

“We are going to do everything we can” Noda told reporters in Tokyo on March 11 after the quake. “The fiscal situation can’t be a constraint to addressing this natural disaster.”

The idea of creating paper and computer entries in checking accounts out of nowhere is a damn lazy non-answer. It’s all the more tragic in light of the magnitude of the underlying disaster.

That this event would be used as an excuse to pile on to Japan’s staggering national debt is such a predictable pattern that it warrants no further comment.

For sure the quake could become a welcome scapegoat to blame for Japan’s debt crisis which is now coming full cycle, akin to Germany’s high public debts being blamed on its reunification or the US financial crisis being blamed on the collapse of Lehman …

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