The Japanese economy has been unable to escape the plight of deflation for a long time. The Japanese government and central bank have been fighting deflation for the past three decades, but have been defeated time and time again. Even with the severe impact of the COVID-19 epidemic on the global supply chain, inflation in the United States and Europe has increased significantly, while Japan's inflation remains at a low level, which shows the strong deflationary power of the Japanese economy.
In the nearly two decades before the epidemic, inflation in the United States has been hovering at a low level. Even if a large-scale monetary release policy is implemented, it will be difficult to effectively boost inflation. After the outbreak of the epidemic, the Trump administration released large-scale monetary releases and distributed $600 in cash to most people, but inflation still failed to rise. After the Biden administration distributed $1,400 in cash to most Americans, inflation immediately picked up due to the strong stimulation of consumption.
On March 11, US President Biden signed a $1.9 trillion COVID-19 relief bill, and the plan to distribute large-scale money to residents was officially implemented. In March, U.S. retail sales increased by 9.8% month-on-month, and the consumer price index (CPI) increased by 0.6% month-on-month and 2.6% year-on-year. In April, U.S. CPI increased by 0.8% month-on-month and 4.2% year-on-year. Afterwards, the U.S. economy experienced an “epic” recovery. However, as the epidemic continued, serious bottlenecks appeared in the global supply chain, and inflation in the United States continued to rise.
Due to the economic shutdown last year, Japan’s Abe cabinet issued a subsidy of 100,000 yen (approximately US$600) to each citizen in 2020. It may be that the amount was too small and the effect was not obvious. The Trump administration issued The effect of $600 is not obvious. Japan has seen that the United States' large-scale money distribution this year has effectively boosted inflation, and naturally it can't help but want to send money again. I am just afraid of triggering high inflation and do not dare to issue as much as the United States. I only give 100,000 yen to each minor under the age of 18.
The secretaries-general of Japan's ruling Liberal Democratic Party and the Komeito Party held talks in the Diet on November 9. As a pillar of economic countermeasures, the two parties reached an agreement on the policy of distributing 100,000 yen to Japanese minors under the age of 18. 50,000 yen will be distributed first in cash during the year, and the remaining 50,000 yen will in principle be distributed around spring next year as coupons that can only be used for childcare-related purposes.
uses the "money distribution" policy to fight deflation, which treats the symptoms but not the root cause, and will also produce many side effects.
If the "money distribution" is a one-time thing, the boost to inflation will only be temporary. If we continue to "distribute money", government debt will grow rapidly and it is likely to cause financial chaos.
The "money distribution" policy cannot improve income distribution, whether it is a one-time "money distribution" or a continuous "money distribution".
One person has an annual income of 100,000, and another person has an annual income of 10,000. If these two people were each given 100,000 yuan, wouldn’t the income gap between them be almost eliminated? The person with an annual income of 10,000 yuan relies on labor income, and the person with an annual income of 100,000 yuan relies on asset gains. Each person is given 100,000 yuan. With more money, the assets have not increased. If the assets have not been transferred, won't the income gap eventually widen to the same level as before?
The "money distribution" policy will also reduce the government's investment in social security, exacerbating the gap between the rich and the poor.
Since the 1980s, a trend of "universal basic income" has become popular in Western countries. The so-called "universal basic income" means "paying money to all." Advocates of this trend of thought place their hope on “Universal Unconditional Basic Income” to replace the current modern social security system, whose functions are increasingly weakening, to provide people with basic living needs.
can directly distribute money to the people, but it cannot guarantee that the people will spend the money to meet their basic living needs, nor can it guarantee that the supply and consumption of basic living necessities can be effectively increased, nor can it guarantee that the people's basic living needs can be effectively improved.
People may use government money to buy luxury goods or even gamble. This means that a large amount of money that could have been used to increase food supply, increase medical service supply, and increase housing supply is spent on purchasing luxury goods and non-essential living expenses.Isn't this a serious waste of social resources and labor?
If it cannot effectively increase the supply of basic daily necessities, what is the use of sending more money to the people?
imagines that in the desert, there is an extreme shortage of water, and water resources are monopolized by a few interest groups, and water is sold at sky-high prices. People need to work extremely hard to exchange for a little water to sustain life. Can the government hand out lots of cash to everyone change this situation? No matter how much money is given, won't it end up in the pockets of interest groups that monopolize water resources?
What does the government need to do to fundamentally improve this situation? Expropriate some water resources from monopoly groups for free and distribute them to everyone for free. The value of water then decreases because of diminishing marginal utility. In this way, the surplus value that monopoly interest groups can capture by relying on water resources will be reduced, and the degree of inequality in income distribution will be reduced.
If the government cannot fundamentally reduce the value of resources and services such as housing, education, and medical care, how can it solve the problems of high housing prices, high medical expenses, and high tuition fees no matter how much money it sends? How can income distribution be fundamentally improved?
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