This page has been archived and commenting is disabled.

Crashing Yen Leads To Record Number Of Japanese Bankruptcies

Tyler Durden's picture




 

Last week, Zero Hedge first showed a chart so simple, even a Krugman could get it: at this point (and really ever since USDJPY 110 and higher), any incremental Yen devaluation is destructive for the Japanese economy, leading to an unprecedented surge in corporate bankruptcies and, ultimately, economic depression.

 

The obvious logic here led even the Keynesian studs at Goldman to declare that "Further yen depreciation could be a net burden." Unfortunately for Abe and Kuroda, halting the Yen devaluation here would be suicide, as Japan now needs its currency to devalue every single day to mask the fact of the underlying economic devastation, or else the Japanese people may (and should) vote Abe out, which would lead to a prompt end to Abenomics, an epic collapse in the Nikkei, and put thousands of weak-Yen chasing Mrs. Watanabes in margin call purgatory.

Sadly, that will not happen. We say "sadly" because an end end to Abenomics, which is really Krugmanomics now, is the only thing that could save Japan now. And just to prove that, here is Japan Times confirming what we said, with a report that "Corporate bankruptcies linked to the yen’s slide hit a new record in November, highlighting the strains on small and midsize companies as Prime Minister Shinzo Abe campaigns for re-election on his deflation-busting economic strategy."

Forty-two of the companies that failed in November cited the weakened currency as a contributing cause, bringing total bankruptcies associated with the yen so far this year to 301, almost triple that of the same period in 2013, according to a survey by Teikoku Databank Ltd.

It said surging costs of imported food, metals and construction materials are squeezing small companies.

 

The yen broke through 120 per dollar on Thursday in New York for the first time since 2007, as Abe’s handpicked Bank of Japan governor pumps a record amount of funds into the economy to stoke inflation.

...

 

"The business conditions for small and medium-size companies are severe,” said Norio Miyagawa, an economist at Mizuho Securities Co. “The more the yen weakens, the more the drawbacks will become evident, unless the benefits big companies are seeing spill over to consumption through an increase in wages.”

 

By region, the Kanto area including Tokyo accounted for 11 of the 42 bankruptcies, followed by eight each in the Chubu region around Nagoya and the Kinki region covering Osaka, and five in Hokkaido.

 

In the first 11 months of this year, the number of bankruptcies induced by the weak yen soared 2.7-fold from a year before to 301, including 75 in Tokyo, 39 in Osaka, 36 in Hokkaido and 35 in Aichi.

 

“While imported food and construction material prices have soared on the weakening yen, most small companies have failed to pass these hikes on to their product prices,” a Teikoku Databank official said.

 

As the yen continues to drop, the agency expects such bankruptcies to rise further. Since the Bank of Japan expanded its radical monetary easing program on Oct. 31, the dollar has strengthened by about ¥10."

Not enough? Here is some more from Bloomberg:

Eight years ago, Isuzu Glass Co. was held up by Japan’s trade ministry as a star among the nation’s small manufacturers. Today, it’s bankrupt, a victim of the weak yen ushered in by Abenomics.

 

The maker of optical filter glass from the country’s industrial heartland in Osaka was one of a record number of corporate failures last month linked to the slumping currency, according to Teikoku Databank Ltd. Founded in 1905, Isuzu succumbed to a surge in costs of imported raw materials that is pinching many small businesses as Prime Minister Shinzo Abe tries to stoke inflation in the world’s third-biggest economy.

 

Forty-two of the companies that failed in November cited the yen’s drop as a contributor, bringing the total number of bankruptcies associated with the currency this year to 301, almost triple that of the same period in 2013, according to Teikoku Databank. Soaring costs of imported food, metals and construction materials squeezed small companies, it said.

 

“Business conditions for small and medium-sized companies are severe,” said Norio Miyagawa, an economist at Mizuho Securities Co. “The more the yen weakens, the more the drawbacks will become evident, unless the benefits big companies are seeing spill over to consumption through an increase in wages.”

They won't, because the "big companies" realize one thing: the endgame of Keynesian economic devastation in Japan has arrived, and it is so simple a Keynesian caveman can do it.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 12/05/2014 - 08:57 | 5519917 GetZeeGold
GetZeeGold's picture

 

 

This could be big......might even set some records.

 

Do the Japanese have to buy healthcare too?

Fri, 12/05/2014 - 09:04 | 5519937 Headbanger
Headbanger's picture

Moar like Kamikaze crashing !!

Banzai fuckashit round-eye!

Fri, 12/05/2014 - 09:38 | 5520039 MalteseFalcon
MalteseFalcon's picture

The bubble economy has built a large amount of uneconomic units.  There will have to be a lot of destruction of said units before any recovery is possible.  It's good news.

And so it begins in a land with no resources.

What to do?

Figure out where the economically viable places are and hide there.

Fri, 12/05/2014 - 08:56 | 5519919 beavertails
beavertails's picture

We bankrupted some Japs

Fri, 12/05/2014 - 09:00 | 5519930 GetZeeGold
GetZeeGold's picture

 

 

 

It's worse than we thought.....turns out Godzilla is a banker.

Fri, 12/05/2014 - 09:06 | 5519944 Four chan
Four chan's picture

godzilla is jewish?

Fri, 12/05/2014 - 09:13 | 5519955 Seasmoke
Seasmoke's picture

No but he is also doing God's work 

Fri, 12/05/2014 - 10:10 | 5520195 lakecity55
lakecity55's picture

From "Tales of the Talmud"

"Godzilla, a creature made by radioactivity, was invented by Yoshiro Silverman, in Tokyo, 1959."

Fri, 12/05/2014 - 09:00 | 5519928 ClassicCommodity
ClassicCommodity's picture

Hurry up and crash already

Fri, 12/05/2014 - 09:01 | 5519932 toros
toros's picture

Put a fork in it - I mean chop sticks.  YEN is at 12 year low.  Oil's dump can't even stop the bleeding here, gold/yen is nearing all time highs which is really what is reflecting what inflation is like in Japan.  Japan is going to get it's wish for higher inflation alright, it's just going to be 10%yoy.

Fri, 12/05/2014 - 09:03 | 5519934 pendragon
pendragon's picture

it's so subjective it's unmeasurable

Fri, 12/05/2014 - 09:04 | 5519936 apberusdisvet
apberusdisvet's picture

SAYONARA

Fri, 12/05/2014 - 09:03 | 5519938 RyeWhiskey
RyeWhiskey's picture

Kamikaze-d. Forcefully.

Fri, 12/05/2014 - 09:04 | 5519940 AdvancingTime
AdvancingTime's picture

 It is clear that the prospects for Japan are lousy. 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 and realizes even a weaker yen will not help we will see a tsunami of money fleeing Japan. This will 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.

http://brucewilds.blogspot.com/2014/05/japan-sliding-towards-abyss.html

Fri, 12/05/2014 - 09:59 | 5520143 silverer
silverer's picture

The only way out is an increase in productivity to cover the shortfall. I don't think that will happen. Productivity can be measured, but it's not one of those things they can play with in their economic equations and policies to produce actual results, because human labor and productivity cannot be manipulated on paper like so many other things we see. Japan, as another ZH reader here mentioned, is a country with little natural resources, making incremental increases in productivity particularly challenging because you don't control the feedstock of production. It's one of those pesky things in the economic equation that can't be papered over (but they're trying). These smart folks at the top are used to making stuff up. You can't make up real work or change reality. And only so much government and debt can be supported by the real work that's actually still happening.

Fri, 12/05/2014 - 09:04 | 5519941 pitchforksanonymous
pitchforksanonymous's picture

Abe is positioning himself nicely for a job at the Fed in a few years.

Fri, 12/05/2014 - 09:09 | 5519947 Four chan
Four chan's picture

lol

Fri, 12/05/2014 - 09:08 | 5519945 AdvancingTime
AdvancingTime's picture

Recently released minutes from the last Federal Reserve meeting confirmed growing concern about the pressure a stronger dollar is putting on other currencies around the world. Bottom-line is other currencies are under assault because both economies are weak and countries are buried in debt they can never repay at real market interest rates. When investors become unwilling to buy the bonds of heavily indebted nations causing the bond bubble to burst the values of currencies in those countries will tumble.

While there are not many Bond Vigilantes there are a slew of  Currency Vigilantes and they are ready to make their presence known. Recent weakness in the value of the Yen, Pound, and Euro must not go unnoticed. The Currency Vigilantes are acutely aware of when a currency is overvalued or ready to be re-pegged and pounce on the weak currency to tear it apart. The article below questions just how stable the currency markets really are and it may be a signal that currency trading is about to get very wild. Please note, this may also be sending a signal that the whole system is unstable and the stock market is about to be hit with contagion and drop like a stone.

Many people are looking for a "dis-inflationary crash" and it is possible or we may see money shift from bubble to bubble. I have pondered the possibility that what we are and have been going through is the "major deflationary period" before the storm. When we stand on the abyss central bankers will be forced to print so much worthless paper the money will act as a cushion to our fall but not change the reality. Before you discount this possibility that we will move directly into the final stage of hyperinflation consider that hyperinflation paves an easier transition to a replacement currency and a reset of the system.

 http://brucewilds.blogspot.com/2014/10/fed-concerned-that-stong-dollar.h...

Fri, 12/05/2014 - 12:13 | 5520724 Tall Tom
Tall Tom's picture

Deflations precede hyperinflations. A hyperinflation ensures the destruction of the current currency.

 

People do not just abandon their National Currency willingly and will refuse to replace it until it no longer functions. Nationalism is just another form of pride.

 

Without even reading your linked article what you present here makes sense.

 

The NWO is moving toward a World Currency. There is not one thing that you, or I, or anyone else here can do to stop it.

Fri, 12/05/2014 - 09:09 | 5519949 Seasmoke
Seasmoke's picture

If I didn't dislike radiation so much, I would move with all my Gold to Tokyo and live like an emperor. 

Fri, 12/05/2014 - 09:13 | 5519954 Oldwood
Oldwood's picture

What would Kyle Bass say?

Fri, 12/05/2014 - 09:31 | 5520013 GetZeeGold
GetZeeGold's picture

 

 

Don't buy any wooden nickels?

Fri, 12/05/2014 - 10:20 | 5520240 Uchtdorf
Uchtdorf's picture

Gentlemen, please remove your hats as I invoke the name of Kyle Bass.

Oh Kyle, we are thankful for thy warnings. We pray thou will forgive us for every time we spent our FRNs and Euros and Loonies on trivial trinkets instead of true treasures like gold and silver. Be with us now during our hour of need, we ask in the name of Hayek and Mises and Andrew "Kill the Bank" Jackson. Can I get an "amen"?

Fri, 12/05/2014 - 09:25 | 5519983 youngman
youngman's picture

With monetary moves this big  and this quick....you know its going to affect many people....and companies....you just cant adjust that fast....this is the future with all the Algos in the system now...they are playing with your lives and future...

Fri, 12/05/2014 - 09:54 | 5519984 LawsofPhysics
LawsofPhysics's picture

Interesting, for some reason I don't think that the term "bankruptcy" really means what it use to.

Fri, 12/05/2014 - 10:03 | 5520160 silverer
silverer's picture

Good point. Once again, the pretenders at the top are mutating that as well. They don't like the actual losses and necessary corrections that occur, because it occurs to those that made poor decisions: Not a reason in their minds to pay the piper.

Fri, 12/05/2014 - 09:29 | 5520010 sudzee
sudzee's picture

I look forward to my next toyota camrey for 1/2 the price of my current one. Maybe a good time to short GM.

Fri, 12/05/2014 - 09:37 | 5520033 Kamath
Kamath's picture

121.18 now. :O

Fri, 12/05/2014 - 09:49 | 5520096 mastersnark
mastersnark's picture

Going to need a bigger helicopter.

Fri, 12/05/2014 - 09:58 | 5520142 Sick
Sick's picture

Importers are killed with weak currency, Exporters are somewhat helped with weak currency but only short term.  The thing is that most exporters import materials to produce export products.

Fri, 12/05/2014 - 10:24 | 5520260 Uchtdorf
Uchtdorf's picture

+1000

What part of "resource-poor country" does Abe not get? Oh, he gets it alright. He's as big a pawn in the hands of the elites as Obama. It will be hard for those elected to lead to ever atone for what they've done.

Fri, 12/05/2014 - 10:31 | 5520299 q99x2
q99x2's picture

What do you do for food in Japan if there's no work?

Fri, 12/05/2014 - 12:17 | 5520745 clade7
clade7's picture

 

 

You eat Chinese?  I would say Mexican except for the freight costs..

Fri, 12/05/2014 - 20:58 | 5522554 StychoKiller
StychoKiller's picture

Soyrent Green??

Fri, 12/05/2014 - 11:25 | 5520525 short screwed
short screwed's picture

But I thought a falling currency was only bad for Russia.

Fri, 12/05/2014 - 13:48 | 5521073 Dead Canary
Dead Canary's picture

Some folks in Japaneseland are bankrupt.

Do NOT follow this link or you will be banned from the site!