Today's Coming Crisis Movie

Wednesday, August 10, 2011

With Ratings Companies Circling, Japan Parties Reach Compromise

One country that is taking the Standard & Poor's downgrading of US debt to heart is Japan. It is no secret that Japan, with its high government debt-to-GDP ratio, was a prime target for a downgrade.

Politically, Japan resembles the United States in terms of political gridlock between the government controlled lower house and an upper house controlled by the opposition. While unlike the American model, the two houses are not equal in power, the opposition control of the upper house made the passage of financial legislation an impossibility.

Now a new agreement between the ruling Democratic Party of Japan (DPJ) and the Liberal Democratic Party (LDP) and the LDP's traditional ally Komeito has assured passage of a deficit-financing bill via a bond issue.

The opposition had held up its approval for the bill because it demanded as a price that the government backtrack from major policies that proved popular with the electorate. These included monthly child cash stipends designed to stimulate the country's anemic birthrate, free high school education designed to promote greater equality and farm subsidies in an attempt to crack the LDP's rural electoral stronghold. (more)