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Home Publications Blogs Beat the Press Fred Hiatt Spews a Cornucopia of Misinformation in Column on Japan

Fred Hiatt Spews a Cornucopia of Misinformation in Column on Japan

Friday, 20 April 2012 07:15

Readers will no doubt be asking if Japan can be saved from the Washington Post after reading Fred Hiatt's column titled (in the print edition) "Can Japan Save Itself?" The column slams readers with large masses of inaccuracy that pass for conventional wisdom in Washington.

The fun begins in the second paragraph which tells readers:

"Much of Europe has spent itself into near-bankruptcy."

This is of course not true. While Greece and Portugal did have serious pre-crisis deficit problems, Europe's real problem was that the European Central Bank was building the Maginot Line against inflation and ignoring the massive asset bubbles and resulting imbalances that would eventually lead to the economic crisis in 2008. If we had seen the same budget paths not accompanied by the economic crisis, governments would have relatively little difficulty dealing with their fiscal problems.

The next sentence tells readers that:

"In Washington, Simpson-Bowles has come and gone."

Actually, Simpson-Bowles never came. The co-chairs' report did not get the votes needed to be approved as a report of the commission. As folks outside Washington say, the Moment of Truth is a lie.

Then we get Japan's big crisis. Japan's debt to GDP ratio is 230 percent of GDP. While this is indeed a huge number, its interest burden last year was less than 1.0 percent of its GDP. This is because its short-term interest rate is near zero and even its 10-year bond rate is just 1.0 percent.

Japan's major problem is not its debt, but rather a lack of demand. It still has not found a way to make up the demand lost from the collapse of its stock and housing bubble in 1989-1990. The proposal to double the value added tax from 5 percent to 10 percent, which Hiatt applauds, would go in the wrong direction.

This tax increase would reduce demand, lowering growth and decreasing employment. If Hiatt knows a way that this tax increase could boost growth he would probably win a Nobel prize in economics if he shared it with readers. 

The piece also referred to Japan negotiating a "free-trade" agreement with the United States. This is wrong. Japan is negotiating a "trade" agreement with the United States. It cannot accurately be called a "free-trade" agreement since it will almost certainly result in an increase in some forms of protectionism, most notably patent and copyright protection.

Comments (9)Add Comment
written by Lex, April 20, 2012 9:06
Delete the last four words of the post title and you'll be good to go.

/editing police
Off topic--media and SS
written by Jennifer Reft , April 20, 2012 3:16
Not anything you don't already know but interesting.

Japan Committing Harakiri?
written by Paul, April 20, 2012 5:44
Premier Noda to the WaPo:
"A consumption tax increase would ease fears about ballooning national debt and prevent a collapse of the aging country’s strained social security system, he said."

How can Japan's leadership get everything wrong?

Wait I know the answer: Attacking Pearl Harbor will win the war!
Related note
written by David, April 20, 2012 6:16
I'd like to hear Dr. Baker's take on Richard Koo's proposed solution to the Euro crisis: only allow nationals to buy government bonds (so only Spaniards buy Spanish bonds; Greeks buy Greek bonds; etc.). A short description in a 6 page paper, recently presented in Berlin, can be found here: http://ineteconomics.org/sites...-paper.pdf.

Sounds simple enough, and it would provide a way out of the 'suicide pact' but are there any untoward repercussions to be wary of?
Japan is relevant, except for when it's not
written by Matt, April 20, 2012 7:24
Amazing how the example of Japan is only relevant to wingnuts occasionally - the rest of the time, they pretend it doesn't exist. After all, seeing a country with a substantial debt-to-GDP ratio and an aging population that STILL HASN'T experienced a complete economic collapse would make it way harder to advocate that Grandma should eat catfood now to prevent disaster...
Solution to the Euro Crisis
written by Paul, April 20, 2012 8:47
Germany, France, U.S., China, U.K., etc. all commit to buy trillions of euros worth of Greek, Spanish, Irish and Portuguese goods and services over next 5 years.

Increased consumption is the ONLY way forward. Keynes is not wrong.
Mr. Hiatt's well-deserved award
written by John Q, April 21, 2012 4:14
written by urban legend, April 22, 2012 1:28
With both countries members of WIPO and signatories to the Berne Convention, and with Japan and the U.S. leading the world in per capita patents granted, in what way might we expect the intellectual property monopolies to be expanded -- or is that just another throw-in line?

The Constitution contemplates that inventors and authors will have the "exclusive right" to their inventions and discoveries -- in other words, a monopoly, for a limited time. Instead of implying that grants of patent or copyright protection in and of themselves are questionable under the antitrust laws or some kind of violation of a free market economy, it would be a lot more useful to paint a clear picture how in various circumstances -- e.g., drugs -- the "limited times" qualification is abused or grants are too freely given.

Since it is one of the most inventive countries with the most prolific publishing, with millions employed in generally well-paying jobs in those functions, it would generally be considered an advantage to the U.S. to have its inventions and works of authorship protected under appropriate principles as widely and uniformly as possible throughout the world. It may be our best export product. Letting those millions of jobs be threatened in the imagined effect that lower consumer prices will work to everyone's advantage outweighing the jobs lost by the affected workers is exactly the same flawed thinking -- the Walmart Shopper Defense -- that has seen one industry after another abandon the country.
Land bubble
written by Matt, April 23, 2012 12:03
LAND bubble. Say it! Say it, damn it! Japan is screwed because the Japanese spent a decade bidding up the prices of land in Japan.

Once we allow ourselves to know this is what happened, the solution is more obvious. But the first step is being willing to know it was a LAND bubble.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.