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Japanese Micro-Steps Toward The End Of An Era
By Wolf Richter www.testosteronepit.com
“Japan’s economy is likely to continue to face a severe situation for the time being, especially with respect to exports,” said Masaaki Shirakawa, the Governor of the Bank of Japan, when he was talking to business executives in Nagoya (Japan Today). He blamed the European debt crisis and the strong yen.
Whatever the causes—Eurozone chaos, dollar devaluation, yuan peg, etc.—the strong yen puts pressure on Japanese exporters to sacrifice profits overseas or lose market share. Consequently, exporters have redoubled their efforts to relocate production to plants outside Japan. Honda and Toyota announced that they would switch production of certain vehicles from plants in Japan to their plants in Alabama for export to South Korea. Honda announced that it would shift production of big motorcycles from Japan to Thailand. The list goes on. Japan Inc. is adjusting to the strong yen.
Not surprisingly, trade deficits are making a regular appearance. The October details were ugly. Exports fell 3.7% from a year earlier, in part due to sluggish IT demand. Exports to China skidded 7.7%. Imports were up 17.9%. It was the fifth month of trade deficits this year (graph), and Export Nation Extraordinaire will likely end up with a trade deficit for 2011. The end of an era.
So, October unemployment jumped to 4.5% from 4.1%. By US standards, it’s still low; birthrates have been declining for decades, and every year, fewer and fewer young people enter the workforce as more and more people retire at the top end. Another ratio that looks outright glorious compared to the jobs nightmare in the US: there were 67 job offers to every 100 job hunters. So unemployment will not be a huge issue.
What will be a huge issue is having these fewer workers service the exploding gross national debt that has reached the astronomical level of 230% of GDP (Greece’s may hit 160% soon). Repaying it is impossible. And at some point, the house of cards will come down, either through massive inflation, devaluation, or selective default. In the interim, the BoJ tries to keep yields near zero to essentially eliminate interest expense as a budget item. A matter of financial survival. The BoJ has no other option. If short-term rates rose from near zero to, say, 3% on this kind of indebtedness, the government would not be able to make interest payments for long. Selective default would be one of the options. A scary thought.
A thought that probably every Japanese adult has had. It’s a fact of life. So, Japanese household spending has been dropping for eight consecutive months, according to the Ministry of Internal Affairs (Japan Today). And the big consumption tax hike that is making its way through the political system isn’t exactly an uplifting thought either.
To counter all this, the BoJ increased its asset buying program by ¥5 trillion to ¥55 trillion ($724 billion). The additional cash will be plowed into Japanese government bonds in an endless strategy of printing money and buying assets to prop up the house of cards. And it’s working: 10-year yields are around 1% despite the dance of downgrades that won’t stop at the current AA- rating. At these yields, practically no one outside Japan wants to buy this crappy debt—95% is internally funded.
The BoJ’s other bets have been REITs and EFTs. Since December 15, 2010, it intervened in the open markets whenever the Nikkei dropped significantly during the morning session. Currently, purchases are capped at ¥1.4 trillion ($18.4 billion). For greater effect, they’re published on the BoJ website. But it has been a losing trade. Despite these purchases that were supposed to prop up the markets, the Nikkei is down 22% from its February high this year (and down 78% from its all-time high in 1989).
“This is not what a central bank should be doing,” said Masaaki Kanno, BoJ’s former chief foreign-exchange dealer (Bloomberg). “The program started in an emergency, and it’s been snowballing.”
Meanwhile, life goes on in Japan with its own vibrancy, innovation, renewals ... and concerns, the latest being colon cancer. On Monday, the National Cancer Center released the results of a long-term study that confirmed that people who ate large quantities of red meat (beef and pork) were at elevated risk of colon cancer. Nothing new. But the quantities were stunning: for example, men who ate a daily average of 100 grams or more of red meat (measured before cooking) were 44% more likely to get colon cancer. 100 grams per day! That's 3.5 ounces before cooking. Maybe four bites after cooking.
The new prime minister and his loose-lipped cabinet, however, are tangled up in other challenges.... Minister Calls Tsunami Victims 'Idiots'
Wolf Richter www.testosteronepit.com
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"..men who ate a daily average of 100 grams or more of red meat ..were 44% more likely to get colon cancer"
44% more than what???
Smokers are 400% more likely to get lung cancer than non-smokers. That's 400% more than a 1 in 1,200 lifetime chance... get your atomic level electron microscopes out to worry about that microscopic triviality (not including the fact non-smokers, and their children, suffer from more cancers than smokers)
With the Japanese politicians micro-managing every facet of the economy, right down to taxi drivers wearing white gloves, maybe one day these tossers will try giving freedom a chance and butting the fuck out of it (20 years of abject miserable failure to turn the economy around not enough for these Govt losers?)
So this 'Japanese Model' is exactly what the US(and proly Europe) will be pursuing for the next 100 years, get ready for 1% 10yr. Bonds here and everywhere
Japan should have been toast 20 years ago but they are still churning, this 'fact' surely did not escape the Plutocrats in the West, ergo if your debt interest is 0 or near 0 the debt load itself matters very little especially if you have great influence over the lender
YCS
The effect of money printing is not fully realized until that new money is used to bid for products and wages.
The reason that Japan has not yet had inflation from all the BOJ's money printing is because compulsive saving has sopped up those yen and stashed them away in the banking system. So a lot of those newly printed Yens have not yet been used to bid for wages or prices. However, as workers retire and start to draw on those same savings, those Yen will finally make their delayed debut and be used to bid for consumer goods and staples.
Yeah well, expect the Yen to strengthen, especialy if the BoJ is going 'easy' on other 'assets' as well as government bonds. Speculators don't give a shit about safety, or risk on or risk off, they give a shit about bond prices, rising bond prices.
The low birth rate in Japan is not a problem but rather a strength from an economical point view. It does not matter which supply of labour you have unless there is sufficient demand for labour.
As computers and robots take over more and more jobs, the demand for labour shrinks.
The problem is not lack of labour but the fact that the Japanese people, like most other people, do not own enough stock that could give them incomes generated by the work done by computers and robots rather than human beings. Instead of stock, the Japanese people have bought government bonds. And government bonds can not really generate wealth for a country or its citizens.
However, people should keep in mind that pensioners in Japan don´t get generous pensions from the government. Instead, people have bought government bonds. If the Japanese public debt is adjusted for the smaller pension obligations for the Japanese government compared to other countries, the debt problem does not look that bad compared to other countries. But they can probably not continue in the same way as they have done over the past 20 years.
"And government bonds can not really generate wealth for a country or its citizens."
Can the government tax the owners of the computers and robots?
And the surviving children of the citizens who will be passing away, will get to divvy up what's left of the pie amongst a smaller number of survivors, so things should work out pretty well for the Japanese as long as they say enough loss from debt slavery is enough and repudiate their national debt in time.
im going to get colon cancer bitchez
Japan's ability to avoid default and severe depression via controlled money printing, accounting fraud, financial repression, and market manipulation have created the the playbook that Bernanke and every other central banker is using now to maintain the status quo. The cost of these manipulations is the creation of increasingly kleptocratic and inefficient zombie economies. The future of the world looks very bleak for the 99% but it's party on for the 1%. Better get rich quick cause you are going to need the money to pay for security guards, bribes, and ransom payments.
Doko Mr. Roboto?
http://www.youtube.com/watch?v=1LjkC3eT6LA
What nuclear industry shill said the reactors have cooled. He doesnt know shit.
Temperature has gone “over scale” at reactor 2http://fukushima-diary.com/2011/11/temperature-has-gone-over-scale-at-re...
You fucking moron
And everyone on ZH should be donating to Mochizuki at Fukushima Diary. He is doing Yeomans work tranlating the Japanese news our MSM doesnt want us to read, like Greenpeace Japans high radiation reading in canned fish from Japanese supermarkets (not even on Greenpeaces English site). Thats it for canned fish. Its all glowing.
I gain no benefit from his site, but my family is overseas Japanese and are too afraid to go home and visit relatives.
Aha, a 1% chance if you don't eat red meat and 1.44%if you do.. Scary!
Japan is toast within a few years:
Kyle Bass: Which Countries Are Beyond the Point of Return and Why
http://www.youtube.com/watch?v=-quUyId2WZ0
Japan is becoming more like "AKIRA" and "Ghost in the Shell" everyday.
I'm going to have to watch that one, thanks ;-)
From the movie, “Ghost in the Shell 2: Innocence”
(Japanese dialogue, English subtitles)
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Batou: Life and death come and go like marionettes dancing on a table. Once their strings are cut, they easily crumble.
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
(unrelated, but relevant, in this “material world”)
Major Motoko Kusanagi: Let one walk alone, committing no sin, with few wishes, like elephants in the forest. (Based on a Buddhist Poem)
You should note the avatar is the 90,000 ton Godzilla stomping Tokyo, eating everything in its path.
The Godzilla in the room is not even mentioned! Japan has a massive problem in Fukushima with four reactors out of control.
If the government doesn't get serious about the reactors they will have a lot of other things to worry about besides car sales and bond rates.
The condition at the four Dai ichi reactors is sensitive. Reactor temperatures are fluctuating and reactivity has been indicated at two of them. It is not out of the question that one or more reactor cores might explode or spent fuel catch fire.
There is over 1000 tons of highly energized fuel in the four reactors.
Right now, the Japgov does nothing but pretend the reactors are fixing themselves. Besides common spent fuel there are three reactor cores plus spent fuel atop the four reactor buildings. There are also two cores plus spent fuel loads at the two reactors 5 and 6 @ Dai ichi.
There are forty eight other reactors in Japan: the Fukushima disaster will cost Japan a $trillion without any additional problems plus the cost of decommissioning the remaining reactors. As with Chernobyl and the USSR, Fukushima is likely to bankrupt Japan.
Worst case scenario: an explosion which requires Japan to be abandoned, a regional radiological 'event' that involves China and Korea with fallout worldwide.
Fukushima is not over, it is potentially a 'world ender'.
Nice try. The reactors have been cooled down.
As per Trading Troll Supra:
What nuclear industry shill said the reactors have cooled. He doesnt know shit.
Temperature has gone “over scale” at reactor 2
http://fukushima-diary.com/2011/11/temperature-has-gone-over-scale-at-re...
You fucking moron
And everyone on ZH should be donating to Mochizuki at Fukushima Diary. He is doing Yeomans work tranlating the Japanese news our MSM doesnt want us to read, like Greenpeace Japans high radiation reading in canned fish from Japanese supermarkets (not even on Greenpeaces English site). Thats it for canned fish. Its all glowing.
I gain no benefit from his site, but my family is overseas Japanese and are too afraid to go home and visit relatives.
Kill the trolls!
At least the Northern hemisphere of Japan that includes Tokyo will be absolutely recognized as uninhabitable within two years by even the nuclear shills. There is no current remedy for ground water radiation contamination nor will one become available in the foreseeable future. Yes, the situation is hopeless, a foreign situation that none of us has experienced to this point in our lives.
I am sincerely sorry for those so adversely affected especially in the Fukushima corridor extending to Tokyo. I humbly suggest that getting one's affairs in order is grossly understating the magnitude of the issue. Leaving unfortunately is likely moot. Why must it be this way!
Perfect Storm...dead ahead. With no demands for answers the questions only grow louder and with greater force.
nippon sayonara
Japan going to copy America....the offshoring and outsourcing part. Toyota and Sony to be made in China.
The best of the best Japanese graduates no longer wish to be corporate slaves. They want.....government careers.
Bullish!
I still have a hard time understanding the "safe haven" status there.
I would just like to know why hyperinflation isn't next up for them.
Sad situation.