Memo To Japan: It Is Going To Be A Cold, Expensive Winter

Tyler Durden's picture

Two weeks ago we showed that while the short-term gains generated by the Japanese stock market are welcome, the impact of Abe's synthetic "wealth effect" is far less than generally accepted for one reason: unlike the US, the financial assets held by the Japanese public in the form of equities are a tiny fraction of the whole pie.

However, while the Nikkei surging was a boost to a small percentage of the Japanese population, the negative offset, the lost purchasing power due to a plunging Yen which is the sole reason for the nominal rise in the stock market, has impacted all equally. And as the January trade deficit data showed, when Japan's trade deficit plunged to a record level despite the arrival of Abe (or perhaps due to: after all, the nationalist regime's territorial squabble with China has been a primary reason why Chinese imports from Japan has imploded), the primary reason for crushing the Yen: unleashing exports (or boosting the current account surplus for that matter), has so far been a complete disaster.

One must also remember that Abenomics' reflation attempt is being enacted at a time when Japan, in the aftermath of Fukushima, has virtually no domestic energy creation left as the entire local nuclear power industry has been mothballed, resulting in a chart showing the Japanese power generated by nuclear looking like this:

Yet one place where Abenomics has worked "miracles", inversely to what was intended, is in the area of energy import prices. As the chart below from Diapason shows, and just as we warned would happen, the price of LNG imports into Japan have just hit all time highs.

Which means one thing: while Abenomics has failed in spurring exports, while the rise in the Nikkei has benefited some 1-2% of the population, the most direct consequence of crushing the yen some 20% is that energy costs, virtually all of them imported, are if not surging, then about to soar to all time highs.

In other words, our sincerest condolences to Japan, for whom this winter will be a very cold one (and a very hot summer follows), unless of course in Japan, like in the US, energy costs don't matter when calculating CPI and inflation and the consumer can spend any amount to keep themelves warm, or cold as the case may be.

Naturally, should inflation accurately reflect that record surge in LNG prices, then Abe's inflation target of 2% has long since been surpassed however without generating any of the required beneficial side effects. All this would mean that central planning has failed once more: who would a thunk it?

And as a final thought experiment corollary: perhaps the reason why Japan has been so belligerent when it comes to the Senkakus/Diaoyu islands is because the administration knows that relinquishing control of the Chunxiao gas field would force the country to revert back to its deflationary path in a world in which it is forced to rely on external, and very rapidly inflating in price, sources of energy.

Now for those who recall their history, is this not simply a replica of the conditions that led to Japan's premeditated, and US-devised, attack on Pearl Harbor (recall the McCollum memo from October 7, 1940)?

Which then begs the question: is Goldman Sachs, in its policy of populating every central bank with its tentacles, and pursuing - without fail - a reflationary policy which leads a wealth effect for the 0.1%, and the kind of general popular outcome that led to Pearl Harbor and the US entrance into World War 2, simply agitating behind the scenes for global war: whether it be between Japan and China, whether it is the Arab Spring of 2011 due to soaring food prices, whether it is the advent of Neo-Nazi powers in Europe due to preserving the EUR-centered status quo, and which inevitably will result in bloody civil conflict?

Because while millions may die, just think of the benefits to global GDP, and to those financially innovative companies that know just how to provide funding in times of global need, should yet another global war break out...

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falak pema's picture

The whole dichotomy about "values" and wanting to "live in the instance"; 'cos our current civilization is all about the latter at the expense of the former, as the consumerist culture has developed and pervaded all.

ZH does give us sometimes a look back into the past from where we're coming and who the movers and shakers were who made the 20 th century come about, like in this thread : The Men Who Built America: Remembering The Gilded Age Part 1 | Zero Hedge

This is just one instance that stirred up a debate about what the trade offs are between living "successfully" and living "honestly" and we all feel at ZH something is really wrong with first world about our root values and how easy it is in today's world to forget them; notwithstanding that as a generation we have been programmed to celebrate "Woodstockian here and now pop culture and all that goes with it!"

Just to reverberate on this theme :  here is an article that tries to define the time line about how US culture morphed in post WWI from a culture of "NEEDS" to a culture of "DESIRES" and how the second was fanned by the corporate culture of those "who built America! "

Birth Of Consumer Culture - Business Insider

Interesting reading and IMO a time line flag to what needs to be put right, by the coming generations in terms of values and mindsets. Living frugally will be very "in". We always learn our lessons the hard way. 

PUD's picture

Go to "Top documentaries dot com" search "All wars are bankers wars"

nuff said

Not Too Important's picture

Revenue is not a problem. The EU, long after the US and Canada did it, has resinded the restriction on imported Japanese radioactive beef, to prevent the need for further horse/donkey/assmeat consumption.

If you thought videos of sick cows being moved into the slaughterhouse by forklift is disgusting, wait until they can shoot those movies at night because the cattle glow in the dark.

Dareconomics's picture

All carbon prices are rising in yen terms including oil. Japan is going to get the inflation it as always wanted:


Japan's Crisis Has Begun

ShakaZulu's picture

You want my personal non-psychic, purely speculative opinion?  If Japan pokes China in the eye long enough on behalf of the American Militarist Banker Scum to the astonishment of the rest of the world they will become the very first glass parking lot on earth.  It will then be a very cold nuclear winter for the rest of us.

OMG's picture

Paging Kyle Bass please pick up the white phone sir!

hooligan2009's picture

solution = switch to geo thermal...its on the burning "ring of fire" ffs.

ask iceland for the technology

VyseLegendaire's picture

While I like the thrust of this article, I am somewhat hoping that humanity has learned a couple of lessons since the 1940s and won't turn to pointless aggressive wars to 'solve' problems (courtesy of the bankers' funding).

Also I think its about time Zero Hedge hires an editor to read these articles before they're published. Why can't the author of these articles realize that embedding entire sentences within parentheses, and sentences within sentences separate by commas, makes the entire clause practically unreadable without re-reading multiple times?

Sandmann's picture

There were wars in the "1940s" ? In Europe we started ours in the 1930s

css1971's picture

I am somewhat hoping that humanity has learned a couple of lessons


TPTB_r_TBTF's picture

"Hope", that feeling which precedes disappointment.

dunce's picture

Some times the amount of energy used to produce a unit of GDP is calculated to determine efficient use of energy, and the % of electrical energy produced by nukes is common, but i have never seen a calculation on how a country might  be more competitive by using more nuke produced energy and less imported hydro carbons. i heard they restarted their nukes, but it still looks to me like a critical and huge part of Japan's future to remain a factor in world markets. Clearly we have at least good  short term options and i do not mean wind and solar, but japan can not indulge in foolish uneconomic projects. Every product has an cost that can be measured in energy units and a price in currency directly related to energy unit costs.

NEOSERF's picture

ZH should sponsor the first ever Japan Haiku Contest.  5 lines encapsulating the epic decline of this once proud people.