Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o Japan’s debt has inflated to nearly $9 trillion – more than double the size of its economy. The country has used debt to address its problems over the years, ranging from COVID-19 relief aid to subsidies to help consumers weather inflation to additional social security funding for Japan’s growing number of seniors. However, as the Japanese businesses that are impacted by American tariffs are struggling and seeking government aid, Japanese households are dealing with rising prices and demanding a rollback in taxes.
However, the Bank of Japan has decided to move away from negative interest rates that have made it easy for the government to borrow, the limits on spending are more glaring. Most economists agree that Japan is not headed for an imminent financial crisis because a large portion of the debt is held by the Bank of Japan and domestic financial institutions that makes it a low risk that the money will suddenly be pulled out of the country. However, worries are mounting over its spending and the sustainability of its spending, as bondholders could become more apprehensive over the government’s ability to pay back its debt. [The New York Times]
o An English football club and an American brewery have teamed up to form a unique marketing idea to draw fans to grow its business. American brewery NoFo Brew Co. has become a fixture among Walsall FC – competing in the English Football League (EFL) Two – after the brewery’s owners became investors of Walsall FC in 2022. The brewery now distributes its beer to more than 150 locations in central England and is expanding into Ireland.
The owners of the brewery – Bryan and Shannon Miles – reached an agreement with the club in 2023 to take over an abandoned pub inside the stadium, allowing them to produce and distribute the beer there. As a result, the brewery business has grown exponentially. At the same time, Walsall was one of the top teams of League Two in the first half of the season, bringing financial success to the club and to the in-house brewpub. [The New York Times]
o McDonald’s announced the closing of CosMc’s – its beverage-focused business. McDonald’s tested CosMc’s and entered into the beverage business to rival coffee chains such as Starbucks in 2023. While CosMc’s originally drew long lines due to curiosity, lines eventually thinned out.
Eight location sites were built and five open throughout Illinois and Texas. The final locations will be closed next month, according to the company.McDonald’s didn’t reveal how much it spent on the CosMc’s project, but some of the novel drinks will be sold in McDonald’s restaurants. By selling the drinks at McDonald’s restaurants, the company hopes customers will buy more food. [The Wall Street Journal]
o Chinese tech companies have taken become more competitive on a global scale in recent years. Upstarts are pushing the boundaries of innovation. China intends to invest $138 billion in robotics and high tech in the next two years. China already has a higher density of robots per human on its factory floors than the United States and Japan, is preparing humanoids to move into increasingly complex roles. The roles range from sorting garbage and delivering medicines to nursing homes to patrolling the streets alongside police officers and serving as a museum tour guide. And they are even reportedly being tested for military combat.
Citigroup recently projected that the market for robots will surge by 2050 to $7 trillion and that the world could be populated by more nearly 650 million human-like robots. It has garnered the attention of many of the world’s elite, including Elon Musk. Musk believes that with the assistance of robots, the global economy could grow to 10 times its current size. [Bloomberg]
o Some economists are warning that exempting tips from taxes could encourage employers to reduce hourly wages. Under the proposal in the Senate seeking to eliminate taxes made from tips, employees earning $160,000 or less in 2025 would get a tax break up to $25,000 per year on tips. The measure would be extended for restaurant workers, as well as ride-share and delivery drivers.
Roughly four million Americans work in occupations that relied on tips in 2023, according to Yale Budget Lab. Critics also believe that with Americans experiencing tip fatigue, that eliminating taxes on tips would exasperate pressure on consumers to leave tips. In addition, more companies could argue that their employees qualify for reduced minimum wage by allowing them to take tax-free tips. [The Washington Post]
