FX Macroeconomics as redistribution), but instead
the Abe government is still poised to raise the retail sales tax next year and in 2015, as the DPJ legislated (and which contributed to its political loss last year). Abe said he wants wages to rise, but wanting and doing are not the same thing.
Lower real interest rate may not absorb the surplus savings as much as change their location by prompting a reallocation of portfolios to equities and real estate for example. I n s
t ead ,
J a p a nese officials may be better served by addressing the corporate savings surplus directly.
There are
could be cut, but this might not trickle down to households as their equity holdings tend to be a small part of their financial assets, and could end up simply redistributing the corporate surplus among businesses.
Of their financial assets, the equity
holdings of Japanese
households as of March 2012, was about 6.5%, nearly half of what it was in March 2007.
deposits gets taxed by 20%. Cutting taxes on stock options could also be considered. It should give strong incentive to boost stock prices by corporate management. Higher stock prices would boost ROE.
Businesses are opposed to the suggestion that retained earnings should be taxed. Corporate governance reform could also force a reduction in corporate savings if sh a reho lde rs had more power. A more p o l it ic a l ly palatable route seems to be tax based on the size of the business (pro forma basis).
many forms this could take. Japan could consider dramatically reducing tax for entertainment expenses. The tax breaks for entertainment expenses are intended to encourage corporate spending on entertainment such as dining and drinking as part of measures to buoy the sluggish economy. The tax on dividends
Japanese officials may be better served by addressing the corporate savings surplus directly
The comparable figures for the US households are 31.9% and 36.3% respectively.
Cutting taxes on capital gains on stock investment could facilitate a shift by households towards equity from deposits. Currently, interest income from
22 FX TRADER MAGAZINE July - September 2013
In order to conceive the so l u t io n, J a p a nese policy makers and investors
need to perceive the problem. Yet, ideological blinders are preventing this, and serve to keep Japan pushing on the same string , albeit somewhat harder, as it has for the better part of two decades.
Marc Chandler and Masashi Murata
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