Unrealized profit” exceeds 30 trillion yen due to the weak yen…Reason to believe that the “special foreign exchange market” can cover the funding for the “1,030,000 yen barrier” of the National Democratic Party of Japan.

Don’t miss this historic opportunity to “end deflation!

Some may argue that since it is only an unrealized gain, “it cannot be a permanent source of revenue. However, there is a strong possibility that the inflation adjustment does not need to be a permanent source of revenue. According to Toshihiro Nagahama of the Dai-ichi Life Institute, using the Cabinet Office’s “medium- to long-term economic and fiscal calculations,” in the “growth transition case” in which stable growth above 1% in real terms is secured, “¥7.6 trillion can be raised if the GDP deflator stays at +0.6-0.7%.

Growth exceeding 1% in real terms” and “GDP deflator +0.6-0.7%” are not major hurdles. In other words, there is a strong possibility that tax cuts can be continued as long as the government provides financial resources for the next two to three years. To begin with, the government’s estimate of a 7.6 trillion yen decrease in tax revenues does not take into account the increase in tax revenues that will result from economic growth through increased consumption and labor supply due to the tax cuts. The decrease in tax revenues should be much smaller.

It is often claimed that “most of the tax cut will go to savings,” but this is thought to be limited to temporary “disbursements” such as “special flat-rate benefits. The increase in disposable income resulting from the increase in income tax deductions is permanent, and most of it is likely to go to consumption.

According to the 2024 Labor Economy Analysis by the Ministry of Health, Reiwa, the average propensity to consume, which indicates the percentage of permanent disposable income that goes to consumption, is 86% (in 2011). In other words, nearly 90% goes to consumption. The increase in personal consumption is expected to boost GDP significantly.

The DPJ’s proposal also has its flaws, if one were to go into detail. Even if the income tax deduction is revised, there are still “barriers” in the social security system that prevent a drastic solution, and various other criticisms remain. However, it is simply a matter of first resolving the highest priority issues and then correcting any glitches as they arise.

As stated in the aforementioned Cabinet Office document, “Japan’s economy is now facing a once-in-a-lifetime historic opportunity to completely break free from deflation and realize a growth-oriented economy.” The unrealized gains in the foreign exchange market are one of the few by-products that the people of Japan have gained in exchange for deflation. If they do not use it now, when will they use it?