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Abegeddon: Household Spending Re-Collapses As Japanese Unemployment Jumps To 9-Month High
Just when you thought it couldn't get any worse... In a veritable deluge of data from Japan tonight, there is - simply put - no silver lining. First, Japan's jobless rate unexpectedly jumped to 3.8% - its highest since Nov 2013 (despite the highest job-to-applicant ratio in 22 years). Then, household spending re-collapsed 5.9% for the 4th month in a row (showingh no sign of post-tax-hike-recovery). Industrial Production was up next and dramatically missed expectations with a mere 0.2% rebound after last month's plunge (-0.9% YoY - worst in 13 months), quickly followed by a 0.5% drop in Japanes retail trade MoM (missing hope for a 0.3% gain). That's good news, right? Means moar QQE, right? Wrong! Japanese CPI came hot at 3.4% YoY with energy costs and electronic goods 'hyperinflating' at 8.8% and 9.1% respectively. As Goldman's chief Japan economist warns, "the BOJ doesn’t have another bazooka," adding that "The window for reform may already have been half closed." We're gonna need another arrow, Abe!
Japanese unemployment jumps to highest since Nov 2013...
But the job-to-applicant ratio is at its highest since 1992 (no incentive to work?)
Blowing the idea that "slack" is creating deflation out of the water.
Household spending then collapsed 5.9% YoY... 4th month in a row...
As Bloomberg notes, Inflation-adjusted household income fell 6.2% in July y/y, extending its slide to a 10th month in a row, according to data released today by Japan’s statistics bureau. That is the longest period of declines since at least 2004
Retail Sales dropped and missed again...
- Credit creation slowed as Loans rose only 1.95% YoY - slowest since March
But don't expect Moar QQE... as inflation is on fire...
- MNI: JAPAN JULY CPI ELECTRONICS GOODS +9.1% Y/Y VS JUNE +8.0%
- MNI: JAPAN JULY CPI ENERGY COSTS +8.8% Y/Y VS JUNE +9.6%
- MNI: JAPAN JULY CPI TVS +11.8% Y/Y VS JUNE +8.0%
- MNI: JAPAN JULY CPI FOOD EX-PERISHABLES +4.3% Y/Y; JUNE +4.1%
But apart from that... what a total disaster... only - we are sure - to be met with some glib comment from the Japanese politicians that the recovery is on track and there are signs of recovery...
* * *
Wondering how this ends... here's Bloomberg Briefs Tom Orlik ( @TomOrlik ) discussing the future for Japan with Goldman Sachs' chief Japan economist Naohiko Baba
Why Japan May Catapult From Deflation to Stagflation
ONE ON ONE TOM ORLIK, BLOOMBERG ECONOMIST
A heroic attempt to lift Japan’s economy out of deflation may succeed only in pushing it into stagflation. Goldman Sachs’ chief Japan economist Naohiko Baba tells Bloomberg Economist Tom Orlik why he thinks reviving growth will be tough.
Q: What’s your assessment of Abenomics’ progress so far?
A: Monetary and fiscal stimulus has provided a boost to the markets but the real economic impact is short lived. Structural reform is most important and progress has been limited. Discussion of the Trans-Pacific Partnership has been delayed. There’s been very little progress on labor market reform. We’re seeing higher labor force participation, but that reflects a recovery trend in place from before the start of Abenomics. The impact of reforms has been very limited.
Q: Do you think the Bank of Japan can hit its 2 percent inflation target?
A: I am skeptical. The CPI has already declined from its April peak. The BOJ says it will come down to around 1 percent over the summer then rise again from the second half of the fiscal year. They expect higher wages to make the difference. My view is the CPI will fall to around 0.8 percent to 1 percent and then stay there. I don’t expect the wage channel to work. If you look at the spring wage negotiations this year, despite a big government push, the results were disappointing. In 2015, weaker profits will mean reduced funds for firms to pay higher wages. My guess is that July 2014 wage growth could be the peak.
Q: If inflation goes off track, what will the BOJ do?
A: They will keep their program in place through 2016, make it open ended. They might adjust the composition of purchases, buy more ETFs. It’s difficult for them to increase the size of their JGB purchases. Banks have already sold a large part of their government bond portfolio. Liquidity in the market is low. If they can’t increase the size of their program significantly, the BOJ doesn’t have another bazooka.
Q: How do you assess the impact from April’s tax increase?
A: There was front-loading of purchases ahead of the tax increase and then payback afterward. That’s a temporary impact. The bigger worry is the fall in real income from the tax increase and higher inflation. That’s a longer-lasting impact. Second quarter GDP growth was very weak. If you take out the positive contribution from inventory buildup, real growth was minus 11 percent on a quarter-on-quarter annualized basis. That’s much worse than after the 1997 tax increase.
Q: It seems like Abenomics so far has not been good for households.
A: Real wages are falling 3 percent a year. Real disposable income was down minus 8 percent year on year in the June household survey. It is as if Japan’s economy is heading into stagflation. That’s good for managing debt, bad for quality of life. As households see quality of life fall, it may negatively affect the approval rating f r the Cabinet. That will make it harder to push painful structural reforms. The window for reform may already have been half closed.
Charts: Bloomberg
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Hory cwap Shinzo!
JPY Household Spending (YoY) -5.9% -3.0% -3.0%
JPY Household Spending (MoM) -0.2% 1.6% 1.5%
JPY Unemployment Rate 3.8% 3.7% 3.7%
JPY Industrial Production (MoM) 0.2% 1.0% -3.4%
What a fucking bunch of dorks, eh YC?
I would rather have Pat Morita teaching me about economics.
Sand the floor, paint the fence...wax on wax off.
Wakie wakie kiddies bankers and econometricians!
The path has already been trod in Japan for 40 years and this is the inevitable outcome of fiscal largesse and expansive monetary policy supposedly severed up as panaceas to non-monetary problems!
Liquidity Trap!
Abe is proving-out the theory of Austrian School Time Preference in real time that easy money will mal-structure and collapse the economy.
I always wondered how these printfests would end. If a central bankster can print money to keep everyone afloat with cash it is all good. CBs can keep the gobbimint moving forever with the presses. CBs will fail in the long run since huge amounts of mal-investments are found at the corporate and citizen level killing any hope of a true economic revival. Tons of debt that will not be paid back sucking the life out of anything really productive. Japan is approaching debt saturation among the private economy. It is game over.
My econ prof explained to me what a liquidity trap means.
Imagine everybody flushing the toilet at the same time. Pressure stalls and the shit floats to the surface.
So is communism when the government buys all the stocks and bonds?
Communism is when market prices do not exist or are meaningless.
If X owns everything, Y tends not to give a shit about the price.
That doesn't sound like Communism.
Sorry, I can not hear you.
Let's all quit arguing and bickering amongst ourselves as to what it's called other than Fuckedupenomicstm
Just sayin' "giving government monies directly to banks" doesn't sound like communism to me...
I know... Its' Fucked-Up!
Yeah, it doesn't now, probably because you don't know what living with Communism really means. You see, "giving government monies directly to banks" is every bit as efficient as what Communists *actually* do.
How to succeed in Communism without hardly trying: become commrade numero uno. Some commrades are more equal than others.
Consider that the government is not out for itself or for the people but for the banks. What do you call that?
Well...Lenin did honor Russia's debt obligations to the West. Not so sure about Stalin though.
"Depends on how you define debt" I guess. Is it "ability to repay" or actual repayment?
What's hat you say? "We'll just put the Government Monies directly into the Bankster"?
Yeah, sure...that'll work.
Just put another log on the fire and turn on the tele cus Winter is coming.
I'm looking at Japan and thinking that a similar fate awaits Italy, France, Spain.
Japan is truly bolloxed.
I recommend readers get a copy of Alex Kerr's "Of dogs and demons". It tells the story of how the Japanese government have made an utter mess of the Japanese economic miracle.
Governments (especially large and highly powerful) tend to do that, no?
At least they understood they had a mess.
This is far more than a mere financial problem as well. How else to finance Fukushima than with dollars? And now we (meaning you and me and anyone else with eyes and ears) have "Crimea" and quite possibly "the Sinai" as a result.
Duetscheland Uber Dolares?
Putin needs to stop invading. Full fledged capital flight out of Russia would be catastrophic "only made worse by trying to take Kiev." Russia is not just attacking a people but a concept as well "and your opponent may very we'll be a computer."
What?
Question...
Does anyone give a rip about japan anymore?..
I mean who fuckin cares?.. it doesnt mean anything. Must be another slow news day. Jesus.
Lots of UST's might need to be sold in a hurry..
Is Belgium still buying with both hands?
Real wages are falling 3 percent a year...
Part of the plan.
That’s good for managing debt, bad for quality of life...
Also part of the plan. There are no unintended consequences and the maggots don't give a rat's ass about public opinion, public suffering, or elections, or anything other than their own greed.
3.8% unemployment rate? What a farce.
More women in the workforce! That's what Japan needs.
Of course, somebody will have to create those jobs first. It's always in the details.
Oh, and raise that consumption tax again!
Let me guess...Nikkei up and futures green as Granny Smith apples on that news
In a truly Ponzi world the Japanese are surly the winners. How in the world is the Yen still a major currency? The longer this shit print show goes on the more I know there is only one central bank. If BOJ was truly independent and I was running the show, I would print another 100 trillion yen and buy up every once of gold I could. After I accumulated as much as I could I'd default, causing the entire worlds financial system to melt down and having gold become the new standard. Of course not having an army to protect all that gold could be a little problematic. CHINA on the other hand......
Army? Nukes.
There are 4-5 military installations in San Antonio, and a large, mostly passive southern Mexican-American population. We just had a border crisis, and McCaffe previously stated that Belize was selling Hezbollah fake passports. Will they let it happen here? Agencies appear to possibly be influencing/ intimidating??? local authorities, via fusion centers, etc...
I wonder if Asians put their smileys like this ¦)
Honestly now Harry, didn't you learn to keep your Wonds straight after the last episode?
So now is the Yen ready to die? When you introduce demographics into the picture we see that Japan is stuck with an aging and shrinking population that is evermore expensive for the government to provide for. Adding to its woes the Fukushima nuclear disaster has shuttered its nuclear power plants and forced the country to import more expensive energy alternatives.
Neither monetary nor fiscal policy will adequately solve Japan's problems. Continuing to run fiscal deficits only means that government debt is pushed onward and upwards leading to a variety of possible scenarios as to the what the end game will be. Simply put, the fundamentals for Japan are lousy. More on the downward path that Japan is on in the article below.
http://brucewilds.blogspot.com/2014/05/japan-sliding-towards-abyss.html
Charmander for prez
Japan will show the rest of the world what the end game of money printing is like.
Japan survives last 30 years only on it´s reputation, and not on it´s output.
Under this premisse it goes one direction. But US and EU are doing their best to catch up with Japan.
There is a generational change going on in japan and i think for certain that is going full blast in the US now .
Makes no difference tat wages are falling.
We hear about the non participation rate all the time and the fucking shit heads try to ignore it.
But this is happening in Japan and for a lot longer.
For example, what do you do if you are smart, intelligent and there is no job paying what you truly believe you are worth.
Well to start out fresh from graduation you take a shitty job flipping burgers, but you fucking detect every fucking asshole you see in the place.
Then you realize you are not going to get that 50K you were promised and believe you are worth,.
And slowly it dawns on you that others in the same boat as you seem to be doing OK.
Well I have friends in Japan and they are certainly not kids or fresh out of college and they are also long term drop out.
One explained this way.
"I was a manager at our electrical manufacturing plant making components and in 98 I was dumped.
It was very hard to start with , government payments were OK but too small and so I started really looking for work but in the end that search was just costing me more in energy and expenses than it was worth and the only thing offered were so bad I turned all of them down.
But what did happen was I started to meet new people, same position as I was in and we had beers and told stories and soon I started to understand a new way. Now I will never look for a job, I never need that, my spending is lower, and my time is more free and I do what i like when I like, but I have enough connections now i can get anything, anything from an off the books job to doing a deal like doing a one time job and getting paid in things like bankrupt stock.
That can make a lot of money over a year, You sell those things as you need cash, and you can afford to hold for a good price, but even its lower you don't care because you always another deal will come by tomorrow and you know you can find buyer because your price lower than store. Even sometime we get together to do a deal and all chip in.
Why so many little deals around, That's easy, there are millions like us now, and we are just all dropped off the radar, counted as non participants and we like it that way,. We get no benefits, but so what, Our cohort is now big enough to support ourselves and we have no bureaucracy to worry about, no taxes to pay, Hell I even get most of my groceries by doing deals this way and we eat very well. and at most now I only do any work like this 2 or 3 days or half days a week,.
I'm still better off than most people working around the clock for a wage that's falling and taxes that rising and a boss that gives them shit and pressure and deadlines every day.
My wife is happy, we have a nice life, my mortgage is paid off, faster even than when I was working full time.
Life is more simple and we see the mess in Japan but we are just growing older now and we don't care anymore.
Whatever happen will happen but each day one at a time and so far for more than 15 years I think more happy than times in the the past My wife is happy too and that most important, not what we do or how much we make but only we are content what we have now."
I just think it a matter of time and this will be the US very very soon , What is it now, A hundred million able bodied men and women non participating.
I would like to make a bet that there is nowhere near a hundred million just string at the wall every day, and i will bet more that those numbers that do are dropping as the will to live and get more than food stamps and a brain destroying existence in front of the TV kicks in and this goes on year after year.
A one hundred million strong potential workforce that can be on a tax free income is a very powerful motivator to get involved in that black market economy