What Do America and Japan Have In Common?

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What Do America and Japan Have In Common?

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June 18, 2012

Does anyone remember that movie with Michael Keaton over 25 years ago called Gung Ho? Where a Japanese car company bought out an American plant and there was a clash of the working attitudes of the East and the West? Well, its 25 years later and what do a sideways stock market, a bloated pile of national debt, and a struggling overall economy continue to plague Japan. Wait a minute that last sentence sounds eerily like the United States instead of Japan. Don't we have a sideways stock market, a bloated pile of national debt, and a struggling overall economy? Could it be what Japan is considering doing is a premonition for what will see in the next Gung Ho movie here in the United States?

In a deal that could lead to Japan's first substantial steps toward reducing its burgeoning debt burden, Prime Minister Yoshihiko Noda agreed with the country's two largest opposition parties Friday on legislation to double the country's consumption tax. (source: NY Times)

Mr. Noda has staked the fate of his administration on the bill, which would double Japan's five-percent sales tax by 2015, hinting that he could call a general election if the plan fails to pass parliament before the current session ends next week. (source: NY Times)

During weeks of negotiations, Mr. Noda argued that Japan must raise taxes to shore up its social welfare and pension systems, which have come under growing strain as the country's population ages. Japan's public debt has already grown to over twice the size of its gross domestic product as social welfare spending grows and tax revenues dwindle in a deflationary economy. (source: NY Times)

It's certainly looming in our near future after the upcoming Presidential election that w will have to shore up our Social Security and Medicare system as they are both under fire with the baby boomer generation aging and less tax money going into the system. We saw Herman Cain come out with the 9-9-9 plan, but that type of ideas got quickly put to bed when Mr. Cain dropped out of the running for President.

Under the legislation proposed in Japan, a 5 percent consumption tax would be raised to 8 percent in April 2014, and to 10 percent in October 2015. Japan last raised the consumption tax rate from 3 to 5 percent in 1997. (source: NY Times)

As of yet, nobody has really laid out a game plan on how we will a) balance the overall budget in the United States, and b) start chipping away at the almost 16 trillion dollars of debt we have in the United States. With the commonalities of our overall financial situation, I wonder if an increased consumption tax is coming for our future? Could it be that we take a play from the playbook of the Japanese? I guess we'll have to wait to see Gung Ho Part II.

Written by:

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder of oXYGen Financial, Inc - The Leaders in Gen X & Y Financial Advice and Services

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

This site is published for residents of the United States only. Registered Representatives of Kestra IS and Investment Advisor Representatives of Kestra AS may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all products and services referenced on this site are available in every state and through every representative or advisor listed. For additional information, please contact Kestra IS Compliance Department at 844-553-7872.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. Kestra IS and Kestra AS makes no representation as to the completeness or accuracy of information provided at these web sites. Nor is Kestra IS and Kestra AS liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site. When you access one of these web sites, you are leaving our web site and assume total responsibility and risk for your use of the web sites you are linking to.