Issues such as cash hoarding isn't new to Japan as the practice has been in place for a few years now with interest rates being so low. However policy changes in both the government and monetary sphere may lend a hand in making the situation grow even bigger than how things stand at the moment. Reports coming out that hardware shops are running out of safes due to an unexpected high demand means authorities have more to worry about than what they initially thought.
If Japanese citizens begin increasing the rate at which they withdraw deposits from their bank accounts the mechanism that would gear up monetary policy won't be properly maximised leading to less loans being granted meaning a lower growth in credit spent in the economy, the complete opposite of what policymakers intend on promoting.
An even greater dilemma is that monetary notes are very difficult to track making money laundering, fraud and tax evasion rife. If this trend were to continue at the alarming rate it has it would mean government may have a tough time collecting tax, a hard position to be in considering the awfully high levels of debt the Japanese government has gotten itself into to rescue the economy from stagnation.
Weighing up the beneficial value gained when using negative interest rates as oppose to the detrimental impacts that could implode in the economy, it seems the latter is gathering speedily pace amongst financial media commentary being a relatively untested policy measure.
Whether policymakers have the ability to continue selling their belief that executing such actions will definitely cure their respective economies from the ills besieged on them will prove a tough task and would require a steadfast conviction in the agenda they follow that would run the risk of overstating the importance of such measures and ultimately lead to the disastrous consequences being highlighted presently.
Gordhan to deliver the toughest budget in post democratic South AfricaTucking 10,000-yen bills under the mattress spells worry for Japan's Abe https://t.co/JXcpOWL75e pic.twitter.com/nnmgsWVPYP— Bloomberg Markets (@markets) February 24, 2016
South Africa's finance minister Pravin Gordhan will today present the South African budget speech by pathing the way for rating agencies to ease up on their negative sentiment they've had over the condition of the economy that has been wrought with mismanagement by the Zuma administration and subsequently finds itself in despair after years of misuse.
Gordhan, who made a sweeping comeback in late December following the scandalous sacking of Nhlanhla Nene, has made his intentions known since his appointment. As the country braces for what it expects to be a gloomy speech for disposable incomes and profits, the government has no choice but to save face with rating agencies if it wishes to keep its investment grade rating, by raising tax rates and cutting spending in a dramatic fashion.
One glances back to the economic prosperity experienced under the tenure of former President Thabo Mbeki where GDP growth hit 6% per annum, emergence of the new black middle class gave hope to the future and South Africa was seen as a welcoming destination to investors abroad. One wonders how in eight years this has all come undone?
The mind need not wonder too far to know where the responsibility lies whether or not its fully accept by the person that has led the nation into crisis one scandal after the other. However the focus will sharply turn away from the fumblings of the chuckling president and swiftly concentrate on plans going forward. Hopefully Gordhan has the right charm to convince market participants of the eagerness of government to escape this horrid place currently dissuading investing in and pitch up to the party with a bag of magic tricks. Unfortunately there won't be much magic for South Africans though...
Five charts that show why this budget is so crucial https://t.co/ONgDDrnqpW pic.twitter.com/z19YyyBUW6— Moneyweb Today (@TodayMoneyweb) February 24, 2016
No comments :
Post a Comment