Yoshihide Suga speaks during a press conference following his confirmation as prime minister of … [+] Japan on September 16, 2020 in Tokyo, Japan.
Carl Court/Getty Images
The last 12 months were devastatingly costly for Japan.
As Covid-19 fallout shoulder-checked the global economy, Tokyo rolled out a $2.2 trillion rescue package—more than 40% of gross domestic product. More recently, Prime Minister Yoshihide Suga telegraphed another $708 billion of support as deflationary forces return.
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Suga’s team capped off the last 12 months circulating a truly scary number: 106,610,000,000,000. That’s the size, in yen terms, of Tokyo’s annual budget for fiscal 2021. Yet the unprecedented 106.61 trillion yen ($1.03 trillion) Suga needs just to fund his government is really a result of bad decisions made over the last 12 years.
The dozen years since the global financial crisis of 2008 are as good a window as any to wonder what might have been. If only the resolving of prime ministers and finance ministers since then had raised Japan’s economic game. If only any of the six governments in power since 2008 had loosened labor markets, cut bureaucracy, catalyzed a startup boom, devised a pro-growth energy policy or empowered women.
Instead, the previous five leaders did exactly what Suga is doing now: throwing ever bigger piles of cash at Japan’s problems.
Not to belabor the bookends metaphor here, but Taro Aso deserves special mention in this context. Aso was prime minister back in 2008 amid the “Lehman shock.” And today, he’s serving as Suga’s low-energy finance minister.
Actually, Aso has been doing this job since 2012. That year, former Prime Minister Shinzo Abe took power pledging a structural reform “Big Bang.” He made Aso, a big power player in faction-driven Tokyo politics, to be both deputy premier and finance minister.
Taro Aso speaks with Shinzo Abe during a session at the National Diet in Tokyo on January 26, 2015. … [+]
KAZUHIRO NOGI/AFP via Getty Images
Yet Aso’s team mostly just leaned on the Bank of Japan to boost growth, while Tokyo pumped ever more fiscal stimulus into a deflation-plagued economy. It was the same play Aso’s government ran in 2008. It’s the same one Suga’s three-month-old government is running now, with Aso as his point man.
And it’s not going to work. The $1.03 trillion budget Suga just unveiled is a harbinger of bigger splurges to come. There are many reasons for this. One is that Japan has long since reached what economists call the “diminishing returns” problem. Like a patient taking too many antibiotics, monetary and government stimulus tends to lose potency over time. You need ever bigger jolts to get the intended effect.
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Another: the external sector is still sending powerful headwinds Japan’s way. The U.S. is stumbling anew. Europe’s economies continue to ricochet from one debt trauma to another. And the 2% growth many expect from China isn’t nearly enough of a coattail for developing Asia to ride in the months ahead.
Yet the real problem is how Japan’s demographics is working at cross-purposes with the government’s desire to generate faster growth. In recent decades, government after government pledged policies to do a variety of things: generating higher tax revenues via faster growth; increasing the national birthrate; and finding innovative ways to pay for a rapidly-aging population.
Each saw the magnitude of the task and returned to the same-old, same-old strategy of short-term stimulus. In 2018, that approach pushed the Bank of Japan to a troubling milestone: its balance sheet topped the size of the nation’s $5 trillion economy. More recently, Tokyo has been adding to the national debt with ever-growing abandon.
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In a recent report, analysts at Fitch Solutions noted how Covid-19 era pump-priming is pushing Japan deeper and deeper into the red. Since the coronavirus arrived, the ruling Liberal Democratic Party has tried three times to jolt the economy via borrowing. Fitch said: “Given that the three extra budgets are entirely financed by debt, with new issuance of Japanese government bonds, we estimate that Japan’s debt to GDP ratio will climb to 282.1%, from 271.7% previously calculated in June.”
A debt load of that magnitude might be fine if 30% of the population financing it wasn’t over 65. It might be OK if the economy in question wasn’t in the midst of a two-decade stagnant-wage nightmare. Or if the political system calling the shots had a new and innovative idea now and again.
The costs of Abe’s newly eight years in power are mounting by the day. No, his government doesn’t get all the blame for the uncompetitive and rigid state of Japan’s economy. But Japan’s longest-serving leader had three big things going for him no predecessor did: majorities in both houses of parliament; a clear economic plan, dubbed Abenomics, the population supported; and plenty of time to get major reforms done.
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Abe’s failure to revitalize Japan is evidenced by how quickly the economy folded amid coronavirus fallout. Suga, it’s worth noting, was there all along as Abe’s loyal chief cabinet secretary for seven-plus years. Now, it turns to Suga’s government to end a recession that’s bringing back the deflation with which Tokyo has been grappling for two decades.
There are valid reasons to doubt it’ll work in 2021. Make that 106,610,000,000,000 reasons.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.
The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.
Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.
Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.
Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.
In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.
This report by The Canadian Press was first published Nov. 5, 2024.
