The Katz-Miyao Debate #4: Katz on Miyao

Richard Katz (The Oriental Economist Report)

This commentary originally appeared in the "Japan-U.S. Discussion Fourm" (http://lists.nbr.org/japanforum) on May 16, 2003: posted here with the author's permission.

Takahiro Miyao wrote (http://www.glocom.org/debates/20030519_miyao3/):
"If, however, 'consumer-oriented tax cuts' mean consumption tax cuts and/or income tax cuts, those are likely to be very expensive without stimulating consumption much, because such policies would ignore the seriousness of asset deflation."

This is the same logic that has repeatedly led the MOF to support consumer tax hikes and oppose tax cuts. This is the logic that led to the 1997 consumption tax hike. We've seen the result.

Miyao wrote:
"Without correcting their balance-sheets by boosting housing values or reducing the burden of mortgage payments, consumers are not going to spend a penny (or a yen) out of their income..."

Please give us evidence for your assertion that, over the past decade or two, consumer spending has been determined more by housing prices than by disposable income.