The government can revive the economy, promote employment and spark economic growth by turning around the nation's economic policies
The Kan administration stumbled to defeat in the upper-house election after advocating a 10% consumption tax. The political mood took a sharp turn when the DPJ won 44 seats to the LDP's 51. The administration should first admit its mistake. Imposing a 10% consumption tax in the midst of a worsening deflationary recession would have brought Japan to its knees. We learned in the 1930s what raising taxes in a deflationary spiral can do; history teaches us it would destroy the people's economy. We'd do well to mull over this particular lesson.
The Kan government brought about its own downfall by assisting the Finance Ministry with its plans to drastically hike the consumption tax. It was a very foolish move. But what was also foolish was the administration's wishy-washiness. Prime Minister Naoto Kan is the ultimate populist, as evidenced by his speeches. But because of these moves, he's lost the trust of the people.
The Democratic Party of Japan needs to open its eyes. What the government needs to do above all else is figure out how to get the economy out of its deflationary spiral and onto a path for growth, and how to boost employment. To do this, we need to mobilize on the fiscal and monetary fronts.
After some severe self-criticism, the Kan administration ought to right itself by embracing an aggressive economic agenda to fix our economy.