'Rob the old to pay the young' is latest Japanese plan to kickstart the economy
Published 18/05/2010 | 05:00
THE Japanese government is considering a radical rebalancing of tax law that could take trillions of yen from the coffers of the elderly and put the money into the wallets of the freer-spending young.
The plans come amid rising fears that Japan, with the worst fiscal position of all developed nations, may be teetering towards the brink of its own debt crisis.
The proposal to increase inheritance tax significantly and cut gift tax to about half its present level will be included in the ruling Democratic Party of Japan's manifesto later this month.
The idea is to persuade the massed armies of older Japanese, who sit on vast but static savings, to pass on their money to their children now, rather than waiting to leave it to them in a will.
It is suggested that the younger recipients' spending will boost the economy.
The plan is among a raft of desperate measures with which the eight-month-old government of Yukio Hatoyama hopes to prevent the world's second-largest economy from plunging into long-term decline.
Japan is beset by structural and fiscal problems that bearish observers believe could, given the right trigger, culminate in a Greek-style sovereign debt debacle that would wreak far more spectacular destruction on global markets.
Julian Jessop, a Japan specialist at Capital Economics, called the country's debt position "a crisis in waiting".
Even the most sanguine of analysts admit that Japan's ratio of public borrowings to gross domestic product is unsustainable and that imposing fiscal discipline is a matter of urgency.
On Friday, the International Monetary Fund predicted that Japan's gross debt-to-GDP ratio would rise to 250pc over the next five years.
If the budget does not include any sign that the government is taking fiscal discipline seriously, a fragile balance that has held for a long time may start to crack, Mr Jessop said.
Weekend media reports in Japan also raised the possibility that the country could tumble into a current account deficit by the middle of the decade. (© The Times, London)