Warning for CA: Japan’s tax increases sparked recession

18 Nov, 2014 by John Seiler

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Japanese Prime Minister Shinzo Abe just called for a snap election under their parliamentary system. We’ll soon see if voters affirm his tax-increase policies, which were supposed to restore strong growth but instead slammed the country into another slump.

Due to high taxes and regulations, and faulty monetary policy by the Bank of Japan, the country now now is halfway through its third “lost decade.”

This affects California because Japan is the world’s third (formerly second) largest economy and imports billions of dollars of our state’s exports, while also investing here.

Japan’s tax-increase recession also is a warning to California. Unions and others are seeking to put tax increases, beginning with a continuance of Proposition 30‘s $7 billion a year, on the Nov. 2016 ballot.

Already, despite California supposedly being “back,” it still has the fourth-highest unemployment among the states. It seems to be doing well only because the Federal Reserve Board pumped up the money supply, lifting the boats of all states.

But with the Fed now apparently ending the good times — “removing the punch bowl,” as economists say — a recession could strike. If that happens, the $20 billion California deficits could return with a vengeance and the state, ill prepared to thrive because of its anti-business climate, could say “Sayonara” to prosperity.

Meanwhile, Abe announced the second phase of his tax increases was delayed 18 months, but that Sword of Damocles still hangs over the heads of Japanese businesses and workers.