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Japanese GDP Plunges 6.8% As Consumer Spending Collapses By Most On Record

Tyler Durden's picture


Compared to the 3.6% drop in GDP when Japan last hiked its consumption tax in 1997, today's Q2 GDP collapse of 6.8% annualized is an utter disaster (even if it is slightly better than the expected -7.0% expectations thanks to a surge in the deflator). Inventory additions added 1.0% growth. Consumer Spending collapsed 5.2% QoQ - the most on record. Of course, in the traditional of Keynesian hockey-sticks, this XX% collapse in Q2 is expected to surge back to a 2.5% growth figure in Q3 and lead Japan to the holy grail once more.. only it didn't quite work out that way last time for Japan. Simply put this is the worst posible outcome for bulls, small beat not enopugh to rejuice QQE. As a gentle reminder of just what happened in 1997 - the last time Japan hiked taxes - we provide the eerily analog chart below...


Japanese GDP growth was almost twice as bad as the last time Jap[an hiked its taxes...


As Consumer Spending collapsed...


Here come the hockey-sticks...


*  *  *

Let's hope the last 10 months was just coincidentally 90% correlated to 1997!!


And remember - they were quantitatively easing then too!


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Tue, 08/12/2014 - 20:01 | 5084717 fonzannoon
fonzannoon's picture

"even if it is slightly better than the expected -7.0% expectations"

 - perspective

Tue, 08/12/2014 - 20:05 | 5084744 NoDebt
NoDebt's picture

Yep, beating expectations ALL the way down.

Tue, 08/12/2014 - 20:07 | 5084754 VATICANT
VATICANT's picture

Definitely going to be a global collapse. Wasn't Japan always the second largest economy?? How many US Ts??

Tue, 08/12/2014 - 20:36 | 5084885 max2205
max2205's picture

Now back to the Kareoke Bar!

Tue, 08/12/2014 - 20:42 | 5084915 Elvis the Pelvis
Elvis the Pelvis's picture

That's a huge collapse.  But a lot this shit comes down to demographics.  Too many oldsters.  Perhaps they need a Logan's Run solution.  Bitchez.

Tue, 08/12/2014 - 22:45 | 5085478 S.M.T.U.Q.I.
S.M.T.U.Q.I.'s picture


Wed, 08/13/2014 - 02:02 | 5085962 flyingpigg
flyingpigg's picture

Indeed bullish, Nikkei closed up 52 points!

Tue, 08/12/2014 - 20:43 | 5084918 Mike in GA
Mike in GA's picture

Kyle Bass called it first.  It's playing out pretty much as he thought just not as quickly.  Then again, the can kicking has gone on longer than most observers ever thought it would. 

Japan is world's 3rd largest economy now at 8% of world GDP, behind China's 12%.

This graph  shows US debt distribution including Japan & China as of 11/13.

Wed, 08/13/2014 - 04:12 | 5086092 BrosephStiglitz
BrosephStiglitz's picture

Not really that much of an amazing call from Bass.  I have been telling the macroeconomists since May 2013 than Abenomics looked like the last desperate dice roll of a failing government.  Nobody listened, hell they even overruled me and the official line was that Abenomics was a "prudent macro policy."  The last talk we had was right before the tax hikes went in (and consumer spending was primed to avoid govt. tax grabs).

So, part of me is highly amused by these charts (because it's good to be right), but then I remember all the families and lives that are getting turned upside down on the back of this stupid political scene, and I just feel bad for the Japanese people.  Long nailguns when the Japanese bond market collapses and the Japanese investors (majority of debt held internally) get a donkey-punch from reality.

PS see next: The Japanese Crisis- coming to a Eurozone near you.  No doubt that this will be the deflationary event of the century, followed by the hyperinflationary event of.. well the century I guess?

Tue, 08/12/2014 - 20:29 | 5084845 knukles
knukles's picture


This, people is exactly where the US is headed.  Higher taxes (massive under Obamacare alone) more government spending, unlimited QE'ing, more regulatory interference.  Plus, we got a whole buncha brand new human welfare enrollees flooding the country illegally, let alone spending bazillions killing people in far reaching lands who represent no existential threat whatsoever to our well being, whatsoever.
Every single trend is intact.
Equities will get monkey hammered (possibly just over a long dismal grinding time) bond yields are going to drop and the Reign of Empire is Past.
De-dolarization it self will prohibit the largesse of the Federalies, demanding that total expenditures be decreased by some 50%.
That's the math.

The problems are structural driven my non-monetary affairs which the central banks of the world remain incapable of addressing.

The 4 Horsemen Are In The House!
with elvis, of course 


Tue, 08/12/2014 - 21:13 | 5085069 BringOnTheAsteroid
BringOnTheAsteroid's picture

The prophesy of the 4 horsemen sure was, um , prophetic in so far as galloping in on horses. If they were supposed to be arriving in GM cars this could go on a long, long time. 

Tue, 08/12/2014 - 20:28 | 5084848 dirtscratcher
dirtscratcher's picture

Except for Krugman's. I think he was hoping for moar.

Tue, 08/12/2014 - 20:31 | 5084862 knukles
knukles's picture

Krugman is an economic sophist to be dismissed and ignored.
coulda said asshole, but that would be the same as his ad homenim attacks, so I won't call him the asshole he deserves to be called

Tue, 08/12/2014 - 22:28 | 5085423 oudinot
oudinot's picture

"Sophist" is much more accurate and classier than ,"asshole"

Good call.

Wed, 08/13/2014 - 00:50 | 5085829 aVileRat
aVileRat's picture

Yup. Fucking love all those mutual fund managers talking about the "significant value" seen in Japanese bonds & stocks.

Expect the August numbers to be "seasonally" revised upwards on lower import's, which of course is bullish for Sammie bonds and Tokyo tax revenues.


Tue, 08/12/2014 - 20:08 | 5084762 Greenskeeper_Carl
Greenskeeper_Carl's picture

All they gotta do is start adding in hookers and blow to their calculations. That will fix everything, just ask the Italians.

Tue, 08/12/2014 - 20:17 | 5084797 The Most Intere...
The Most Interesting Frog in the World's picture

If only they had Mexico on their southern border. Oh the possibilities.... Refried bean sashimi and a whole new generation of Spanish speaking freeloaders.

Tue, 08/12/2014 - 20:38 | 5084897 duo
duo's picture

worse than that.  Lots of those kids speak Mayan or some other dialect and not Spanish.  Of course the schools have to provide bilingual education so they are scrambling to find Mayan speakeers before the lawsuits fly.

I knew a waiter in Cozumel that spoke Mayan.  Maybe he could get a visa.

Tue, 08/12/2014 - 20:47 | 5084934 The Most Intere...
The Most Interesting Frog in the World's picture

How do you say, "Visa? I don't need a fucking Visa!" In Mayan?

Tue, 08/12/2014 - 22:07 | 5085337 jballz
jballz's picture

You tattoo some shit on your face and say nothing.

Tue, 08/12/2014 - 20:30 | 5084859 Idleproc
Idleproc's picture


Working in politics and in public offices.
Not contribute to GDP.


Tue, 08/12/2014 - 20:13 | 5084777 ekm1
ekm1's picture

So, still have doubt's on my economic forecasts?

Tue, 08/12/2014 - 20:14 | 5084782 fonzannoon
fonzannoon's picture

Your forecasts are fantastic. It's the market reaction to the forecasts that are concerning.

Tue, 08/12/2014 - 20:18 | 5084802 ekm1
ekm1's picture


That is not a market

That is a video game

Tue, 08/12/2014 - 20:22 | 5084825 robertocarlos
robertocarlos's picture

If I'm so smart, how come I'm not rich?

Tue, 08/12/2014 - 20:24 | 5084832 ekm1
ekm1's picture

Taking risks and lots of luck makes you money, not smartness

Wed, 08/13/2014 - 03:11 | 5086035 Tall Tom
Tall Tom's picture

That is pretty sad. That sounds like blind gambling rather than capitalism.


Las Vegas is actually better as there are some games where you have the advantage, and, if you use your mind, then you can use your mathematical talents to make money.


I suppose that some of those advantage games still exist in the Wall Street Casino. But that used to be the rule rather than the exception.

Tue, 08/12/2014 - 20:17 | 5084798 NoDebt
NoDebt's picture

Though the question wasn't directed at me, I'm familiar with them and I think you're a bit of an optimist.

Have you considered long-dated USTs?  Might want to lock in those 3% yields now or you might suffer from regret later.

Tue, 08/12/2014 - 20:20 | 5084816 ekm1
ekm1's picture

100 day TD bank gsc. Thats it until triple Lehman 

Tue, 08/12/2014 - 20:22 | 5084829 NoDebt
NoDebt's picture

Ah, you're just afraid to reach for a little yield!

Wed, 08/13/2014 - 03:13 | 5086040 Tall Tom
Tall Tom's picture

Think Argentina CDS will be contained?

Tue, 08/12/2014 - 22:57 | 5085518 Greenskeeper_Carl
Greenskeeper_Carl's picture

You are referring to your GDP forecasts, correct? If so I dont doubt they will be pretty close to dead on. What I do doubt is that all of those countries you predicted will admit to numbers as bad as those, especially the US.

Tue, 08/12/2014 - 20:06 | 5084722 Slave
Slave's picture

Wow. This article destroys the "beat". Well done.

Tue, 08/12/2014 - 20:02 | 5084726 Seasmoke
Seasmoke's picture

Buy GOLD !!!!

Tue, 08/12/2014 - 20:04 | 5084737 shouldvekilledthem
shouldvekilledthem's picture

Bitcoin users are not affected. :)

Tue, 08/12/2014 - 20:07 | 5084752 NoDebt
NoDebt's picture

Neither is my gold.

Tue, 08/12/2014 - 20:15 | 5084785 BringOnTheAsteroid
BringOnTheAsteroid's picture

Well of course not, because you lost your gold, remember,in a horrible boating accident. 

Wed, 08/13/2014 - 00:11 | 5085731 RiderOnTheStorm
RiderOnTheStorm's picture

I had a summer gold and i was miserable

Tue, 08/12/2014 - 20:05 | 5084742 Yen Cross
Yen Cross's picture

   Abe go > Blub...Blub...Blub. The Japanese pension funds have been reary patient with Abe.

    I'm curious to see what the next U.S. long term auctions yield. This is a slow motion train wreck.

Tue, 08/12/2014 - 20:09 | 5084761 The Most Intere...
The Most Interesting Frog in the World's picture

Mr Miyagi for Prime Minister!

Tue, 08/12/2014 - 20:22 | 5084830 GooseShtepping Moron
GooseShtepping Moron's picture

Tax on, tax off...

Tue, 08/12/2014 - 20:33 | 5084868 Yen Cross
Yen Cross's picture

   Goose, next week the BoJ and BoE start their policy meetings for 2015.

      I'm still trading the range,(101-102.50)   I think Kyle Bass is spot on, but missed it by a few quarters. I'have my reversals set if anything happens. ;-)

    There's still some more news later/

   JPY         Core Machinery Orders (YoY)           3.3%     -14.3%      
       JPY         Core Machinery Orders (MoM)           15.3%     -19.5%     Tomorrow.

Tue, 08/12/2014 - 20:56 | 5084985 GooseShtepping Moron
GooseShtepping Moron's picture

Thanks, very interesting. I'll never cease to be fascinated by Japan, even in decline.

I always give this guy a plug even though he is no longer active, simply because (barring an old deceased friend of mine) I've never seen a blogger write with more integrity, depth, and beauty.

Tue, 08/12/2014 - 20:06 | 5084749 The Most Intere...
The Most Interesting Frog in the World's picture

Yeah but the Pacific Ocean glows in the dark now. It's not all bad news.

Tue, 08/12/2014 - 20:13 | 5084779 Wait What
Wait What's picture

you're not kidding. water off the coast of california has never been (in my lifetime) as turquoise as it has been this year. pacific wildlife dying off has done wonders for the clarity of water along the west coast.

Tue, 08/12/2014 - 20:34 | 5084875 knukles
knukles's picture

It'll all save on electric costs in the end, so ecologically sound irradiation policies

                       One lump or two, my dear?

Tue, 08/12/2014 - 20:11 | 5084757 ebworthen
ebworthen's picture

90% correlation to '97; ooops!

This demonstrates that printing money, not paying decent rates to savers, and off-shoring production and career employment benefits two groups - bankers and politicians.

The citizens get screwed over a barrel; but that is the purpose of Central Banks to begin with so...

Tue, 08/12/2014 - 20:08 | 5084759 Cognitive Dissonance
Cognitive Dissonance's picture

Expect this to be revised down over the next few months and bottom out around (10%).

Tue, 08/12/2014 - 20:15 | 5084784 Wait What
Wait What's picture

only way to go from there is up! right?

Tue, 08/12/2014 - 20:44 | 5084923 Winston Churchill
Winston Churchill's picture

I'm a great believer in starting at the bottom, and working my way down.

Tue, 08/12/2014 - 20:14 | 5084772 BringOnTheAsteroid
BringOnTheAsteroid's picture

I just had a brilliant idea to keep this whole facade going. Now rather than being overly optimistic all economic forecasters have to do is switch to becoming ridiculously over pessimistic. Next quarter the estimate for Japans GDP contraction just has to be -20% and when it comes in at -18%, perfect, Japan beat expectations, Nikkei soars. Ring, ring, ring, ring . . . . . . . excuse me a sec . . . . . . just have to take this call, "Hello" . . . . . . "Janet who" . . . . . . "oh, Yellen, head of the Fed reserve" . . . . . . . . . . "you've read about my econimic models on ZH and there's an opening on the Fed board which you'd like to nominate me for" . . . . . . . "sorry Janet, but I'm really not interested in working with Jew, you, you I meant you". 

Tue, 08/12/2014 - 21:08 | 5085045 lotsoffun
lotsoffun's picture

be nice, mr. asteriod.  they don't intend to hurt you (ms. yellen and bernake, and greenspan (just saying but,,,,,,) their group of friends).  they just want get ahead.  besides - if you look at the statistics, corporate earnings, p/e bets, employment, gdp bets, 70% of the analysts get it all wrong,  everybody gets to 'beat'.  i know if i came home from grade school with a 70% report card, i would get a beating also....


Wed, 08/13/2014 - 00:48 | 5085822 BringOnTheAsteroid
BringOnTheAsteroid's picture

I appreciate the courtesy and civility Mr Fun but you can call me Bring

Tue, 08/12/2014 - 20:13 | 5084776 pragmatic hobo
pragmatic hobo's picture

better than expected! buy! buy! buy!

Tue, 08/12/2014 - 20:20 | 5084815 yogibear
yogibear's picture

Beat the lowered numbers! Keep lowering the numbers and beating, best game around, never lose.

Tue, 08/12/2014 - 20:16 | 5084790 astoriajoe
astoriajoe's picture

So I'll expect to see more "Date Japanese Women!" ads in the sidebar here in the future?

Tue, 08/12/2014 - 20:16 | 5084793 ekm1
ekm1's picture

About 6 months ago I estimated -5% for Japan.

Also, my all negative estimations for 2014 are as follows:

USA -4%

Eu -6%

Germany -2%

Canada -2%

China -8%

World -5%


These are best case scenarios for 2014

Tue, 08/12/2014 - 20:20 | 5084812 astoriajoe
astoriajoe's picture

I think your outlook would improve if you drank more.


Tue, 08/12/2014 - 20:22 | 5084827 ekm1
ekm1's picture


Tue, 08/12/2014 - 21:20 | 5085097 Non Passaran
Non Passaran's picture

You had cataclysmic forecasts in 2013 or was it 2012 and they all crapped out.
We all had them, but we learned our lesson and don't attempt to make forecasts any more.

Tue, 08/12/2014 - 21:30 | 5085141 ekm1
ekm1's picture

it was may 2013

All of them slowly being proven correct. It's a process

Wed, 08/13/2014 - 03:37 | 5086065 Tall Tom
Tall Tom's picture

So you do not make any forecasts or pay attention to them?


If the weatherman says that there is a chance for showers do you not listen and take an umbrella?


It is the same with making Economic Forecasts. The forecast may turn out to be wrong...or delayed. But if you are prepared then you are able to weather the storm.


It reminds me of a story.


Back in December, 1985, while living in Phoenix, Arizona, the weather forecast declared that it would be SNOWING...IN PHOENIX.


I read that forecast and laughed my ass off. I trained my telescope on Halley's Comet, that evening, as the skies were crystal clear. The next day happened and it was Clear and Sunny. (I remember this event well.) 


Then the same forecast was repeated. Once again I peered at Halley's Comet on that night...under crystal clear skies.


The next morning I awoke to 2 Inches of SNOW on the ground and overcast skies. Needless to say I was shocked. It generally does not snow in Phoenix, Arizona.  Traffic was a little bit snarled as I slip slided through the slush on the streets on my way to work.


I had NOT ONCE...BEFORE OR SINCE...ever had seen Snow on the Ground in Phoenix, Arizona. But that morning it was there.


So sometimes the forecasts have to have TIME to pan out...especially if it is a once in a lifetime the oncoming Financial Collapse.

Wed, 08/13/2014 - 04:23 | 5086104 CHX
CHX's picture

Even if you're right, you'd be wrong...

Tue, 08/12/2014 - 20:18 | 5084803 yogibear
yogibear's picture

Keep lowering the bar and beating. Sure seems bullish. Wall Street says keep buying stocks. A sliding GDP is bullish. Bullish all the way down.

Tue, 08/12/2014 - 20:22 | 5084824 ugmug
ugmug's picture

Obama has already been briefed on the situation. When Obama was getting a suntan on the beach at his vacation paradise on Martha's Vineyard he petted a seal. The Navy has been training seals as Obama's intelligence homies that deliver all of his intelligence briefings.

Tue, 08/12/2014 - 20:22 | 5084828 yogibear
yogibear's picture

CNBC can flip the chart and it looks like a gap up..... Ha, their going to do it?

Always a bull market somewhere.

Tue, 08/12/2014 - 20:26 | 5084841 buzzsaw99
buzzsaw99's picture

china gdp grows 10.1% every other day so ha ha to japanese losers

Tue, 08/12/2014 - 20:29 | 5084855 logicalman
logicalman's picture

Wyle E is going to look down any day now.


I try to be an optimist, despite the evidence against me.


Tue, 08/12/2014 - 20:41 | 5084909 NDXTrader
NDXTrader's picture

Just what the futures needed to stay GREEN *shakes head*

Tue, 08/12/2014 - 20:52 | 5084965 TeraByte
TeraByte's picture

Same lunacy since 1989 and surprisingly the latest reprise did not change the course of economy.

Tue, 08/12/2014 - 21:07 | 5085007 JuliaS
JuliaS's picture

The scarrier number - Japanese household consumption down 19.2% from last quarter. That's from last quarter!!!

... and they're expecting a full turnaround in Q3, as in, going into positive territory. Are they serious?!

Tue, 08/12/2014 - 21:07 | 5085041 illadeljim
illadeljim's picture

And we should worry, because? FREE MONEY! FREE! Yellen rules!

Tue, 08/12/2014 - 21:14 | 5085076 HileTroy
Tue, 08/12/2014 - 21:25 | 5085115 rsnoble
rsnoble's picture

What were they lieing about to have 6.8% to lose in the first place lol.

Tue, 08/12/2014 - 21:37 | 5085182 AdvancingTime
AdvancingTime's picture

To many of us this was not unexpected. Japan continues to slide towards an economic abyss with each passing day. The writing is on the wall. Japan is facing a wall of debt that can only be addressed by printing more money and debasing their currency. This means paying off their debt with worthless yen where possible and in many cases defaulting on promises made. Japan's public debt, which stands at around 230% of its GDP and is the highest in the industrialized world.

 The moment the Japaneses stock market fails to rise enough to offset inflation this will turn into a tsunami of  money fleeing Japan and constitute the end of the line for those left holding both JGBs and the yen. This has been a long time coming and I contend the cross-border flow of money leaving Japan is why some stock markets have remained so resilient . When Japan crumbles it will be felt across the world. More on this subject in the article below.

Tue, 08/12/2014 - 21:45 | 5085219 yogibear
yogibear's picture

The almighty printing press, tough to figure out when the game stops. 

First Japan,then a while later the US.

Tue, 08/12/2014 - 21:57 | 5085285 AgeOfJefferson
AgeOfJefferson's picture

Guys, what do you think will eventually seal the deal for Japan? Will its people always continue to buy its crap bonds? When do you see it really falling apart?

Tue, 08/12/2014 - 21:57 | 5085290 dobermangang
dobermangang's picture

The only things selling well in Japan right now are: Adult diapers and iodine.

Tue, 08/12/2014 - 22:08 | 5085335 TVP
TVP's picture

GDP numbers?  Bunch of shitake.  


How about the collapse in labor-force participation?

Collapse in worker wages?

Collapse in median house-hold income?


Or, if you prefer a glass-half-full approach...


SOARING poverty levels among all demographics?

RECORD NUMBERS of people dependent upon welfare and government assistance?

HUGE INCREASE in public school children living on the streets in America, first time ever!!

And of course - taxes, debt, and regulation through the roof. 


Right, because all that matters consists of the aggregate supply/demand dynamics of corporations, the most holy people on the planet. 

edit: didn't mean to imply that ZH doesn't cover these things.  I'm just pissed that it takes these numbers for people to acknowledge that the collapse has already begun. 

Tue, 08/12/2014 - 22:22 | 5085394 q99x2
q99x2's picture

Abe needs a diaper change.

Tue, 08/12/2014 - 23:15 | 5085576 Ineverslice
Ineverslice's picture


Thought they were all out of straws five years ago....

It just keeps going, and fucking going...just ask K. Bass.

They are winning. Long live FRauD!

Soooo sick of this shit.  Dare to short!

25 years ago..."Japan is screwed"   

.....apparently, they've (all of them and us) got it covered.  Just enjoy your lives :)

Tue, 08/12/2014 - 23:23 | 5085604 Franktastic
Franktastic's picture

the first domino to fall.

Tue, 08/12/2014 - 23:49 | 5085675 q99x2
q99x2's picture

Nikkei up *25 on the news.

Wed, 08/13/2014 - 05:46 | 5086168 orangegeek
orangegeek's picture

moar socialist utopia

Wed, 08/13/2014 - 06:47 | 5086236 J J Pettigrew
J J Pettigrew's picture

zero interest rates removes the consumtive power of the saving consumer.

Japan is a few years ahead of the US...and we follow in their foot steps.

Tax it up, take away a fair return on money, and soon everyone (middle class) is bust.

Quite a model..huh?

Wed, 08/13/2014 - 06:59 | 5086249 Racer
Racer's picture

Just proves with the NIK that "markets" love and adore a Sh!tty economy.

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