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Japan Reflation Deathwish Leads To A 20% Refinery Capacity Cut

Tyler Durden's picture


As if the 20% JPY devaluation over the last few months was not enough, the Japanese government is going directly at the core of the inflation manufacturing business... they have imposed sanctions that Japan's five largest refiners cut their production by 1.1million barrels per day (or 20%). We recently noted (here and here) the rise in both the price of gasoline (at record highs) and JPY-based price of the raw material (WTI or Brent) - and it seems Abenomics can only see the upside of the inflationary cycle (as they cut supply) - as opposed to the consumer-sentiment-sapping margin-crushing deflationary impact of higher input costs to life. One thing is for sure, Abe is all-in - no matter what G-20 defense he offers. Perhaps this is why JGBs have not reacted as much - they are seeing through the short-term inflationary hope to the longer-term deflationary dump.


Remember... the lagged impact of high energy costs...


Chart: Bloomberg


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Wed, 02/13/2013 - 13:54 | Link to Comment BaBaBouy
BaBaBouy's picture

Protect ... Run To GOLD ...

Wed, 02/13/2013 - 13:54 | Link to Comment Say What Again
Say What Again's picture

I can't remember the details, but I think Abe has been nominated for an Oscar.

Wed, 02/13/2013 - 13:58 | Link to Comment redpill
redpill's picture

He spent too long vacationing in Fukushima province

Wed, 02/13/2013 - 16:15 | Link to Comment Just Ice
Just Ice's picture

Indeed.  Full on idiocy.  How soon they all forget what a monstrosity the previous all out yen carry trade was and its eventual unwind.  A primary wedge disconnecting markets from any concerns other than liquidity attained through devalued yen.   (As if central planners and government meddlers actually care about any havoc wrought by their interference or its unintended consequences on market participants, or the public and economy at large.) 

Wed, 02/13/2013 - 13:58 | Link to Comment magpie
magpie's picture

What are you talking about...the Nobel Prize of course, for not going Pearl Harbor this time.

Wed, 02/13/2013 - 14:00 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture


Wed, 02/13/2013 - 15:08 | Link to Comment TheGermanGuy
TheGermanGuy's picture

No, that would be an act of peace... awarding the nobel peace prize for those things is so 90-ish

Wed, 02/13/2013 - 14:04 | Link to Comment EscapeKey
EscapeKey's picture

Must be in the 'special effects' category.

Wed, 02/13/2013 - 14:30 | Link to Comment Winston Churchill
Winston Churchill's picture

Special effects ?

Wed, 02/13/2013 - 13:52 | Link to Comment 1000yrdstare
1000yrdstare's picture
  • The last time they had problems with fuel they had to attack....wonder what they do this time?
Wed, 02/13/2013 - 13:51 | Link to Comment kaa1016
kaa1016's picture

They never learn. For every action, there is an opposite reaction, and it's usually where they don't want it.

Wed, 02/13/2013 - 14:28 | Link to Comment NotApplicable
NotApplicable's picture

You really don't think they understand Hegel's Dialectic?

It's never the action that matters, but the reaction.

It's all about the application of activation energy, and its resulting destructive power. All while hiding behind the facade of plausible deniability.

After all, look at the Fed. In what sort of normal world would bankers EVER be put in charge of managing unemployment? Why would anyone expect that to be within their skill set? Yet hardly a soul brings this up in polite conversation.

Might as well hire a fuckin' chemist, instead of these alchemists.

Wed, 02/13/2013 - 13:53 | Link to Comment Jason T
Jason T's picture

foul up productivity and you'll get your inflation.  we'll get plenty of inflation in the years ahead on shitty productivity growth that's likely to go negative ..soon.

Wed, 02/13/2013 - 14:03 | Link to Comment EscapeKey
EscapeKey's picture

It's no longer called inflation, it's called "nominal GDP targeting". Do try to keep up with central banker jingo.

Wed, 02/13/2013 - 14:31 | Link to Comment NotApplicable
NotApplicable's picture

And as per my post above, just where do bankers learn how this is to be done? You'd think they'd be too busy trying to learn how to become solvent. Yet here they are, messing with the "genetics" of social organization.

False Authority Syndrome, FTW!

Wed, 02/13/2013 - 16:28 | Link to Comment Totentänzerlied
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The econ department at your local university... Go in as a fool, come out as a tool.

Wed, 02/13/2013 - 13:56 | Link to Comment LongSoupLine
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Blame the fucking works for the full fucking retard US data fudge packing assholes.


Fuck you Al Roker, and your fucking weather, for destroying global wealth.

Wed, 02/13/2013 - 14:04 | Link to Comment Midas
Midas's picture

Like Al Roker gives a shit...

Wed, 02/13/2013 - 14:32 | Link to Comment NotApplicable
NotApplicable's picture

I believe he had that part removed.

Wed, 02/13/2013 - 13:58 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

"Increase speed and double the watch. I want to make New York in time for the early morning edition of the papers. Wake me if you have any trouble." - Titanic Captain

Wed, 02/13/2013 - 14:05 | Link to Comment phoolish
phoolish's picture

2013 equivalent of gov shooting cows and dumping milk.


What a great country.



Wed, 02/13/2013 - 14:05 | Link to Comment Not Too Important
Not Too Important's picture

Maybe Abe wants to increase the cost of energy so much, that the public will be screaming for him to turn all the nuclear reactors back on.

The kids are dying at an alarming rate of radiation poisoning, Tokyo is a nuclear waste dump by any international standard, but I suppose at this point, 'What does it matter?", copyright H. Clinton, since they're all dying anyway?

Wed, 02/13/2013 - 15:54 | Link to Comment Bunga Bunga
Bunga Bunga's picture

I don't know what his goals are, but commanding economic activity is just another way of corrupting capitalism. Good luck with that.

Wed, 02/13/2013 - 14:05 | Link to Comment suteibu
suteibu's picture

Higher gas, lost jobs, and lower incomes for those who still have a job.  What's not to like?

Wed, 02/13/2013 - 14:08 | Link to Comment firstdivision
firstdivision's picture

Who bought all the Italian and Spanish soverigns today?

Wed, 02/13/2013 - 14:09 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Who else?

Wed, 02/13/2013 - 14:14 | Link to Comment EscapeKey
EscapeKey's picture

Krugman's aliens.

Wed, 02/13/2013 - 14:33 | Link to Comment NotApplicable
NotApplicable's picture

Your mom.

Wed, 02/13/2013 - 14:08 | Link to Comment Son of Loki
Son of Loki's picture

Price controls always work....just ask Nixon.

Wed, 02/13/2013 - 14:15 | Link to Comment yogibear
yogibear's picture

Time for oil to make a real nice rally. Go back to the highs.

Wed, 02/13/2013 - 14:19 | Link to Comment walküre
walküre's picture

supply side is good, demand is in the gutter

nobody wants to speculate on oil

Wed, 02/13/2013 - 14:16 | Link to Comment Village Smithy
Village Smithy's picture

This one is definitely going to take a while to figure out. Maybe he's lost hope, got his wife to go all in on refiner stocks and is going to cash out just before the inflation tsunami hits.

Wed, 02/13/2013 - 14:18 | Link to Comment walküre
walküre's picture

Abe, my man. Why don't you give every Japanese man, woman and child a gazillion pieces of your Yen paper directly. Air drop it or send it via mail or just blast it into the streets with street sweepers in reverse.

You don't want inflation you want hyper inflation. You want Gozilla type inflation to get your shitty economy back out of the gutter. Don't pull any stops and just do it. Print, print, print and blast it across the two islands like there's no tomorrow.

I know you want to! I dare you! Looser!!!!!!!!!!!!!!!

Wed, 02/13/2013 - 14:20 | Link to Comment NEOSERF
NEOSERF's picture

Fukashima halo allows most bicycles, motorcyles and cars to run sans gasoline.  What is a gallon of gas in Japan? $6.40...yesterday...probably $10 today...sounds like an electric car jumpstart..

Wed, 02/13/2013 - 14:21 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Politicians MUST act. If they fail to act people will realize that we do not need them. Warren Harding failed to act and things got better...he got no credit for 'hands off' approach. Roosevelt acted. He screwed the pooch but there are always things and other people to blame and an eager compliant press to repeat that blame until people believe it. Abe will kill the economy but will come out fine. We will later learn that 'evil speculators' etc were to blame. Gono is still the central banker of Zimbabwe. Do I need to say more?

Wed, 02/13/2013 - 14:22 | Link to Comment SmittyinLA
SmittyinLA's picture

Didn't Exxon just sell a whole bunch of Jap refinery equipment inexplicably just a few short months ago?   At the time I found it "odd" given their current nuclear situation (they literally have Jap consumers over an oil barrel) why sell then? 

So who in Japan came up with this plan?   And why now? 

Wed, 02/13/2013 - 14:34 | Link to Comment NotApplicable
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"Paging David Rockefeller. Please pick up the white courtesy phone in the lobby."

Wed, 02/13/2013 - 14:26 | Link to Comment NoWayJose
NoWayJose's picture

This is the same Abe who is calling for Japanese companies to pay higher wages - of course, those wages will only go to partially cover the real costs of inflation.  It will burst, wipe out Japanese savings, and leave the country destitute.

Wed, 02/13/2013 - 14:26 | Link to Comment magpie
magpie's picture

Whatever happened to their 'special' deal with Saudi Arabia, which was later denied

Wed, 02/13/2013 - 14:31 | Link to Comment Jack Burton
Jack Burton's picture

The signs are ill for Japan. The lost decades were periods of low to no growth. But then population was not growing and standard of living was mostly maintained. And after all Japan was the second largest economy till China grew past them. And Japan had this huge economy on a base of about 120 million people! No small feat!

But now we are past lost decades, we are seeing the real cracks forming. China should be a vast market for Japan's high value added manufacturing ans services. But China prefers to buy Chinese, and their low labor cost attract the Pacific rim manufactureres.

Japan can ill afford to get into an arms race with China, but relations are sinking fast, and the US is encouraging Japan to build up it's military. This will need to be done with borrowed money or simply newly printed money. Just follow the USA model of military expansion, BORROW AND PRINT!  Japan is now approaching panic mode. The big devaluation is a sign of speading Japanese panic.

It is hard for me to find a nation more primed for collapse than the United Kingdom. But that other island nation Japan seems to be beating the UK to the punch. Remember too that these two sick economies are the USA's most important allies in the new cold war against Russia, Iran and China. The three of us have vast military capabilites, all three have built these forces on borrowed and printed money. The arms that Russia and China produce are paid for in cash backed by gold and vast foreign currency reserves. Russia need not borrow a dime to build S-400 mobile anti aircraft missiles, or the new undetectable passive air defense networks, to name a few weapons that would be troublesome for even the US cutting edge military.

Military weakness follows on the heels of economic and political weakness. The axis USA/UK/Japan are showing real economic and political weakness. China especially is waiting in the wings for a US debt crisis to explode. Our feeble minded cogress is going to provide a major currency and debt crisis sooner than later!

Wed, 02/13/2013 - 14:35 | Link to Comment Jim in MN
Jim in MN's picture

US out of Eurasia....

UK and scooch the islands a bit farther offshore?


Screw Eurasia.  China and the Saudis setting oil prices, everyone screwing ordinary folks all over the place.  Bah.  Close all the bases, shut down the drones and let's get our own houses in order.

Wed, 02/13/2013 - 14:50 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"Close all the bases, shut down the drones and let's get our own houses in order."


Only works with countries united by a single race/history whom are well conditioned to what the government says to do (like in china).  Far too many special interest groups in America protecting their own.

Wed, 02/13/2013 - 15:26 | Link to Comment forwardho
forwardho's picture

Indeed. It would seem that the foundations upon which a great country was built have rotted.

Muliculturalism; the process used to splinter, separate, devide a previously homogenous population.

Wed, 02/13/2013 - 14:39 | Link to Comment Greshams Law
Greshams Law's picture

I was with you up until the last line. Congress will continue to kick the can down the road and delay the crises (plural), probably longer than possible. Thus making them worse (if not worser).

Wed, 02/13/2013 - 14:58 | Link to Comment SmittyinLA
SmittyinLA's picture

Japan can compete with anybody or anything, there is no "lower cost labor" than a robot

Wed, 02/13/2013 - 14:29 | Link to Comment Mo Bius
Mo Bius's picture

Abe is in bed with Ben:

Fraud, Fraud, Fraud....

Wed, 02/13/2013 - 14:30 | Link to Comment Jim in MN
Jim in MN's picture

Gold...fishes!  Seriously, kind of cool story.


Gold bars delivered to Ishinomaki fish market

Two gold bars, worth about 107,000 dollars, have been delivered to a fish market in Miyagi Prefecture, northeastern Japan, which was hit by the 2011 tsunami.

Fish market officials in Ishinomaki City have no clue who sent the gold bars, but plan to accept them as a donation for restoration.

In the 2011 tsunami, Ishinomaki City suffered a lot of damage to the fishing port and surrounding facilities.

Fish market representatives say on February 8th they received a package addressed to President Kunio Sunou from a home-delivery service. The package contained 2 gold bars.

They had experts examine the bars and they concluded that the bars are made of pure gold and weigh one kilogram each. The 2 gold bars are estimated to be worth about 107,000 dollars.

On the package "Earthquake Tsunami Aid Society" was written in the sender's column. The parcel was sent from Nagano City and contained no letter.

The catch at the port in Ishinomaki City remains about half of that before the 2011 disaster. Fish market officials are thankful for the gift and are thinking how to make use of it for restoration.

President Sunou says they still have a long way to go in the restoration process, but they have been encouraged by the support.

Feb. 13, 2013 - Updated 09:41 UTC (18:41 JST)

Wed, 02/13/2013 - 14:43 | Link to Comment NotApplicable
NotApplicable's picture

Gold? Well that's weird.

*dons tinfoil hat*

Looking at the map, I can't imagine any area in Japan that would have more radiation contamination in the fish.

It's almost as if someone wants these people to die off quickly.

Wed, 02/13/2013 - 15:24 | Link to Comment ParkAveFlasher
ParkAveFlasher's picture

Gold blocks radiation.  Perhaps it was some kind of message, like the Sicilian "sleeps with the fishes" message.

Tin foil hat chinstrap ... ON

Wed, 02/13/2013 - 15:36 | Link to Comment Aunty Christ
Aunty Christ's picture

I'll be stunned if Abe is still prime minister by 2014

Wed, 02/13/2013 - 17:48 | Link to Comment BigInJapan
BigInJapan's picture

Dirty fucking Japanese Commies.

Wed, 02/13/2013 - 18:03 | Link to Comment rosethorn
rosethorn's picture

A good analysis of Japan's approaching sovereign default crisis: Japan Economy Watch: Japan’s Looming Singularity

"Japan will run out of sufficient savings to buy the whole issue of JGBs by 2016, but the possibilities are the market will respond sooner. If the Japanese government continues to issue debt, the Japanese economy is going to run out of savings to buy the new debtThe share of government debt to total currency and deposits will soon reach close to 100%. At this point of the endgame, there is no way out for Japan: either the central bank or foreigners must take up the bid, or Japan must begin to sell off foreign assets. Markets will price in the endgame before it happens.... then it will be game over!"

Wed, 02/13/2013 - 20:26 | Link to Comment Not Too Important
Not Too Important's picture

Bass. Paging Mr. Bass.

Wed, 02/13/2013 - 18:53 | Link to Comment Lady Heather...UNCLE
Lady Heather...UNCLE's picture, wont the BOJ simply print to buy infinite JGB's been tried before somewhere I think...

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