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Japan Economy Watch

Analysis of Japan's Ongoing Economic Crisis and Its Aging Population Problem

Updated: 2015-09-17T07:53:13.776+02:00


Abenomics 2.0 - Just What Are They Trying To Achieve?


The recent move by the Bank of Japan to take further measures to accelerate the rate at which it ramps up its balance sheet took almost everyone - market watchers included - completely by surprise. The consequence was reasonably predictable - the yen has once more fallen strongly against almost all major currencies - and most notably against the USD - and Japan's main stock indexes are sharply up

Is Japan Back In Recession?


“People should seriously consider that Japan’s economy may have fallen into recession despite the weaker yen and a stock rally from the BOJ’s easing and the flexible fiscal policy by Abe’s administration,” said Maiko Noguchi, senior economist at Daiwa Securities. “Initial expectations that the economy could withstand the negative effects of a sales tax hike through a virtuous circle seem to be

Does Abenomics Work? - The Doubts Grow


Is something in the air? Do I detect a change in consensus on the way things are going in Japan? Certainly a slew of articles have been published in the financial press over the last month questioning where the Abenomics experiment is headed for. The general conclusion seems to be that wherever it is it is certainly not the originally designated endpoint. Thus the Economist. "It is crisis mode

Abenomics - What Could Possibly Go Wrong?


If this week's economics news is positive then that is good.  But if it's bad then that's even better, since there is more potential for it to improve next week, and if it doesn't, well that's doubly better since there will be  even more reason for central banks to step in and push up asset prices. Maybe all this sounds peculiar, even perverse, but it would seem to be how many people working in

Japan Inflation At A 32 Year High?


Just in case anyone was in any doubt last weeks newspaper  headlines blared it out for us loud and clear - Japanese inflation is back, and has even hit levels last seen in 1982. (Click on image below for better viewing). In fact consumer prices in Japan rose at an annual rate of 3.4% in May according to the Bank of Japan's preferred measure, driven higher from one month to another by the

Will Japan Re-enter Deflation in April 2015?


Reading the most recent statements from Bank of Japan Governor Haruhiko Kuroda or Finance Minister Taro Aso you would get the impression that the days of deflation are now well and truly numbered in Japan. Martin Schulz, economist at Fujitsu Research Institute in Tokyo, goes even further. “Deflation is over in Japan,” he told Bloomberg Television First Up’s Angie Lau . Even Japan’s industrial

The Growing Mess Which Will Be Left Behind By The Abenomics Experiment


According to wikipedia, "overdetermination is a phenomenon whereby a single observed effect is determined by multiple causes at once, any one of which alone might be enough to account for ("determine") the effect.That is, there are more causes present than are necessary to generate the effect".  In this strictly technical sense Japan's deflation problem is overdetermined - there are multiple

The Real Experiment That Is Being Carried Out In Japan


The future never resembles the past - as we well know. But, generally speaking, our imagination and our knowledge are too weak to tell us what particular changes to expect. We do not know what the future holds. Nevertheless, as living and moving beings, we are forced to act. - John Maynard Keynes Discussions of the population problem have always had the capacity to stir up public sentiment much

The A-b-e Of Economics


And the world said "Let Shinzo Abe be", and all was light. A new craze is sweeping the planet. Known by the title "Abenomics" over the last couple of years it has been steadily gathering adepts in financial markets across the globe. Despite the fact Abe's move fits comfortably within the austerity vs growth policy axis, at the heart of the new approach lies not a strategy to directly create

Japan’s Looming Singularity


 by Claus Vistesen and Edward Hugh According to Wikipedia, in complex analysis an essential singularity of a function is a "severe" singularity near which the function exhibits extreme behavior. The category essential singularity is a "left-over" or default group of singularities that are especially unmanageable: by definition they fit into neither of the other two categories of singularity

A retrospective look at Japan's banking crisis


I recently stumbled across a research paper by Richard Koo titled "Japan's disposal of bad loans: failure or success?" The thesis of this analysis is that Japanese monetary/fiscal authorities handled their post bubble banking crisis relatively well compared to how the US has handled its banking crisis which began in 2008.  The paper contains a lot of good data so it is worth the time even if you

Japan breaking new ground in monetary policy


In his essay Missing The Big Japan Story - Tim Duy's Fed Watch, Professor Duy provides an in depth analysis of the implications of likely changes upcoming to that country's monetary policy. He states that "something much more significant is afoot - the possibility of explicit cooperation, albeit perhaps forced cooperation, between fiscal and monetary authorities.  The loss of the Bank of

Japan consistently running trade deficits


This chart of Japan's trade balance shows consistent deficits roughly since the Fukushima catastrophe. Since practically all of the country's nuclear power generating capacity has been shut down, the country has been reliant on oil and natural gas imports, which contribute to the negative trade balance. Given this situation, Japan is likely no longer a net purchaser of US Treasury debt.

IMF warns Japan regarding fiscal policy


A noteworthy development today reported by Reuters is  IMF: Japan must raise sales tax to show fiscal commitment | Reuters "The International Monetary Fund urged the Japanese government on Tuesday to raise the country's sales tax and reform its welfare system to demonstrate a commitment to fiscal reform." Japan's parliament is considering a plan to double sales tax rates by 2015.  Similar

Reading The Writing On The Japanese Wall


The recent decision by Fitch Ratings to downgrade the Japanese sovereign by one notch, from from AA minus to A plus, has all the outward appearance of being a predictable non event. As the Reuters article reporting the decision puts it,  "Credit downgrades usually do not have a lasting impact on markets in Japan because its government bonds are mostly held by domestic investors". Yet something

Re-thinking trade policy in an era of expensive energy


In an era of expensive energy, Japan's lack of natural resources and distance from markets (except China) are significant liabilities. Consider Morgan Stanley Ship Hauls Frozen Gas 14,500 Miles to Tokyo - Bloomberg:"Japan’s gas-fired power plants are boosting output to compensate for nuclear reactors shuttered since last year’s earthquake, driving Asia-bound cargoes to a record. The U.S. has

Japan's economic problems in summary


Chris Martenson has released an interesting essay Japan Is Now Another Spinning Plate In The Global Economy Circus and provides a neat summary of the issues the country is facing:-The total shutdown of all 54 nuclear plants, leading to an energy insufficiency-Japan's trade deficit in negative territory for thefirst time in decades, driven largely by energy imports-A budget deficit that is now 56%

Japanese annual trade deficit reflects industrial strategy reversal


Japan's energy and industrial policy that has been in place since the oil crisis of the early 1970's has been overturned.Reuters reports today that Japan's first trade deficit since 1980 raises debt doubts:"Japan runs trade deficit of $32 bln in 2011Dec exports -8.0 pct yr/yr, imports +8.1 pct"A key is the problem of increased reliance on fuel imports due to the loss of nuclear power. Only four

Japan decided to enter the military arms market


The FT reports that "Japan relaxes weapons export ban", stating that "Tokyo has relaxed a decades-old ban on arms exports, opening the way for Japanese companies to participate in the international development and manufacture of advanced weapon systems."This is clearly a move to bolster the country's manufacturing sector and avoid current account deficits, as China's economy has slowed down.It

Elderly Japanese control most of that country’s savings


According to a BusinessWeek article from 2000 Japan, a Nation of Risk-Takers? (int’l edition)“Seniors aged 60 years and over own about 70% of Japan’s $11 trillion in household financial assets. Only 9% of that is directly invested in stocks and a mere 2% in mutual funds.” Eleven years later should mean that Japanese 71 and over hold 70% of $11 trillion or $7.7 trillion in household financial

Is Japan In Danger Of A Deflation Relapse?


"Japan’s V-shaped recovery has now become a statistical fact rather than our forecast. According to retail sales statistics, the level of retail sales in June has already exceeded the level prior to the disaster. Sales of general merchandise and apparel have recovered and replacement demand for vehicles and reconstruction demand for household equipment have lifted sales of these items to above

Japan riddled with toxic waste sites


Alex Kerr, in the book Dogs and Demons, documents how Japan has “only the most primitive regulation of toxic waste” (p. 57), and for comparison describes how “There are more than a thousand controlled hazardous substances in the United States” where as in Japan “only a few dozen substances were subject to government controls” (p. 58). Further, “Japanese laws do not call for

Prospects for dissaving in Japan and inheritance tax


In the book "Dogs and Demons: Tales from the Dark Side of Japan", Alex Kerr notes that Japan has very high inheritance taxes relative to other developed countries. This could be a significant factor in Japan's public and private economic future, as larger numbers of Japanese pass away leaving substantial savings from their estates.BusinessWeek identified the issue back in 1999 in an essay "

Recession returns


Japan's economy has fallen into recession again with two consecutive quarters of negative GDP growth. Gross domestic product contracted 0.9% during the January-March quarter, marking a 3.7% annualized drop, the Cabinet Office reported Thursday. A drop in domestic demand took 0.8 of a percentage point off growth last quarter. Business investment fell 0.9% and consumer spending declined 0.6%.

Japan's Economy Struggles For Air


With the arrival of the first real Japanese data since the Tsunami struck the immensity of the tragedy which Japan is passing through is only now gradually becoming apparent. Exports were down by a seasonally adjusted 7.7% in March over February, while imports were only fell by a much more modest 1.4%, with the inevitable consequence that the trade surplus which forms the lifeline for Japan's