Markets shrug off Greek vote while Japan sees limits to austerity

World markets were only mildly shaken by the result of the Greek referendum on Sunday, which saw a rejection of further austerity.

The S&P 500 slipped 0.4 percent on Monday while the STOXX Europe 600 fell 1.2 percent. The euro lost 0.5 percent against the US dollar while US 10-year Treasury yields fell 10 basis points to 2.29 percent.

Japan's Economy Minister Akira Amari thinks that Greece’s economic meltdown underscores how austerity alone cannot solve a nation’s fiscal problems. From Bloomberg:

Greece is “cutting expenditure and raising taxes, and as a result, tax revenue has fallen further,” Amari said in a July 2 interview at his Tokyo office. “It’s proof that you can’t fix finances by just raising taxes and cutting spending without increasing tax revenues by restoring the economy...”

“There is no fiscal reform without economic revitalization,” Amari said. “Without continuing to steadily boost growth and increasing the size of the economic pie, just hiking taxes and cutting spending would leave us squirming.”

Unfortunately for Japan, hopes of boosting economic growth may prove to be a pipe dream, what with its population shrinking.

Indeed, according to another Bloomberg report, only four cities among the 71 most-populous urban centers ranked by the United Nations are poised to shrink between 2014 and 2030, and all four are in Japan, including Tokyo.

Half a century ago, the Tokyo Olympics ushered in a golden age for Japan’s capital, as industrial prowess made it the largest urban complex in history. Now the games are returning to mark the end of that growth.