Four Years Of Japanese Central Planning Failure Charted

Tyler Durden's picture

Earlier today we presented an extended case by Caixin's Andy Xie, who is now confident that a massive 40% devaluation of the Yen is imminent and inevitable (with dire consequences for regional trading partners), as the opportunity cost, now that the Japanese economy is no longer competitive in the New Normal world (read trade surplus) of delaying what every other central banks has been doing so well (just observe the nominal surge in risk assets at 8 am this morning when Bernanke made it clear more real dilution is coming, as predicted here just yesterday), is the 3 decade long overdue pop in the JGB bond market. Yet as Xie notes, either of these two bubbles popping - the JPY or the JGB - is fraught with danger as both will confirm that three decades of central planning have failed. What is worse, Japan would then become a case study for failed central planning (yes, redundant), everywhere, but nowhere more than in the US. Which in turn, would not be a surprise to most, or at least to those who don't chase dead end momentum trends and heatmapped assets in simplistic hopes of finding a greater fool 1 millisecond into the future. It also would not be a surprise to anyone who sees the following chart from John Lohman which shows the gradual failure of central planning since the second global depression started in 2007 (and offset to date by $7 trillion in central bank private-to-public risk offset), during which time the BOJ has been forced to load up its balance sheet with substantially more assets than its GDP has grown by. Alas, this trend will accelerate which is why with time the exponential chart of central bank balance sheet expansion will only get more "exponential" until it finally pops, bringing with it an end to the truly last bubble. We can only hope we are somewhere far away when that happens.

If nothing else, Japan is the perfect case study of what happens when rates even dare to move higher. Remember: an epic surge
in average interest rates to a whopping 2% and Japan's interest expense
would eclipse the country's tax revenues, at which point it is game

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Cdad's picture

As always, and especially when bankers are involved, success is just off the right side of the chart.

disabledvet's picture

as a matter of fact...IT IS! Don't ask me to explain it. Japan has suffered the biggest industrial accident in human history...and their currency and equity market has rallied. You tell me how they do it...

Renfield's picture

Isn't a mystery why their currency market rallied after that. They had to sell foreign assets to finance reconstruction - they sold a load of USD - yen went up.

Jim Willie (among others) predicted that in mid-2011.

Might have known this piece was by Andy Xie. He's one of the 'good guys' on my list of analysts that make me listen up.

BoNeSxxx's picture

Coming soon to a country near you...

WonderDawg's picture

Sorry for the OT thread hijack, but you'll thank me. Hot RT chick Lauren Lyster interviewing the hottest female brain on the planet, Janet Tavakoli.

Janet Tavakoli is brilliant, and she tells it like it is.


AssFire's picture
Four Years Of Japanese Central Planning Failure Sharted


There, by changing just one letter I rebuked the need for said chart.

(finally an area of my expertise)

I am a Man I am Forty's picture

Lauren Lyster is smoking hot and smart.

ReactionToClosedMinds's picture


Disclosure:  it is too late in the evening to listen to this ... but I will among first readings tomorrow ....

but come on .... Russia Today! >"RT" for the many uninitiated ... it is a Vladimir Putin channel .... no more, no less).    I have heard generally better analysis/useful information  on the Christian News Network or Big Bang Theory or Conan or  anybody more than on Russia Today (always excepting CNBC/MSNBC ..


putaipan's picture's funny huh? all you have to do is get a couple of real truth telling journalists and it's better propagand than you can pay for. god bless the 'red journalism' of the keiser report and capitalaccount !

Dermasolarapaterraphatrima's picture

Excellent interview:

Janet Tavakoli is brilliant, and she tells it like it is.


I've recommended my library get her book about the Robber Barrons of Wall Street.

The USA SEC is know for: #1) zero credibity; and 2) their desire to surf the internet for porn.

Barry would get alot of cred on the street if he chose someone like Tavakoli for the SEC Chief.

Dugald's picture

Could not get past the interviewer with the whiney voice and who  kept  tripping over her tongue...such professionalism, is that what you guys have to put up with? sheesh!

WonderDawg's picture

That's too bad. The interviewer needs some polish, no doubt, but the message Janet Tavakoli delivers is worth waiting for. Besides, Lauren might trip over her tongue, but she looks good doing it. I'd love for her to trip over my tongue.

derek_vineyard's picture

japan game over at 2% 30 year yield


usa game over at 5%?

Western's picture

5% today... 4% in a few months, it keeps decreasing.

tempo's picture

Please read for the continuing dangers from the 4 nuclear plants and radiation levels. Soil samples from 5 area in capital show radiation levels deems radioactive in the USA. Japan will likely be the first of the leveraged giants to collapse.

Tsunami Effect's picture

DUHH ---- Of course this is a bubble!  Every Fed bubble burst, but not before they raise rates.  Just go with the flow and make some money while they are printing it.  When the printing stops, you sell.  Stop over thinking everything ZH!!!!!!!

Cursive's picture

@Tsunami Effect

What if they don't stop printing?  What if we just hyper-inflate into economic oblivion?  What if the money's no good?  Do you really want to re-live "Cold Mountain".

gjp's picture


Exactly the question.  I guess even if cold mountain is the likely outcome, if you can't do anything about it you might as well ride the wave as Tsunami effect (and so many others) is saying.  It's cynical and self-serving but understable, from the perspective of small traders like Tsunami all the way up to the power brokers like Dimon or Blankfein, and even to Bernanke, who probably also doesn't think there's anything he can do about it except extend and pretend.

What's really hard to take in all of this are the arguments (stimulus is for jobs, inflation is controlled and temporary, the government made money on its bailouts, financial wages are necessarily high to pay for the talent, ...) used in defense of an indefensible financial and economic system that is clearly now based on false pretenses where there is no rule of law or reason at the core.  I could handle and maybe even support the extend if I didn't have to swallow the pretend every day in the media, the office, and in the public consciousness.  Living a lie really eats into you.  Ignorance would really be better.


oldman's picture


Cold mountain life is pretty good----lots of zen poets---an occasional taoist or two---great water, birds, rocks, trees, peace, silence, magic

yams, carrots, onions, beans, corn, broccoli, cabbage, lettuce---many things taste grewat raw or cooked when grown there

I liked my life on cold mountain because really cold brrrr-like was 56F. and really sizzling hot was 84F.------------ twelve hours of daylight twelve months of the year------------

I'd be there still, but then I wouldn't have all of this wonderful companionship at ZH

as a consolation prize                                thanks    om

Dr. Engali's picture

They have to print. There is no turning back now. Greece is the perfect case study. Trying to cut back the debt through austerity just killed the economy and sent Greece into a debt spiral. That's the predicament we are in except there won't be anybody there to " bail us out" because there isn't enough money on earth to buy our debt. So the have to print.

Atomizer's picture

Please detail your FED exit plans, inquiring ZH posters are interested in your approach. You realise this is a baited question, and you began the overthinking bit.. Show us your Tsunami firewall calculations. LOL

Demonoid's picture

MITI turned out rather SHITI, eh?


Cursive's picture

Japan implodes some date in the not-too-distant future.  The buses are still running in Amerika, but what will be the first big sign that the facade of our "recovery" has cracked?  Will it be national martial law?  What will Japan look like?

Caviar Emptor's picture

For Japan and the US (and most everywhere in the developed world) it will be a burnt out exurban sprawl. Discount strip clubs, video poker parlors, fast food joints, drug supermarkets, discount clothing outlets. Mexican drug gangs ruling the night. Public hangings by day

Cursive's picture

@Caviar Emptor

Who knew GTA or Saints Row was a glipse into our collective future?

Vic Vinegar's picture

Are you a gamer, Cursive?  Hit me up on the PS Network if you are.

Seems like what Caviar Emptor is describing is the Wild West, just updated for modern times.

Dr. Engali's picture

So nothing changes then right ?

Dugald's picture

Christ! sounds like "On the Beach" bugger!

i-dog's picture

I would place a strong wager that the bankstaz will prop up Japan and Europe longer than they will the US. There is lots of printing to come, but things are moving far faster in the modern world -- especially with the levered derivatives -- than they did "back in the day" of Weimar and Great Depression 1.0.

(Note: There was no hyperinflation during GD1; the cause of GD1 was primarily banks sitting on cash rather than lending. Sound familiar? The money supply didn't start to expand until after the outbreak of WWII. Ben isn't printing banknotes...he's simply padding bank balance sheets -- at home and abroad!).

It still looks (to me) like late-2012 is their endgame, at the rate things have been falling apart over the past 3 months.

Mike in GA's picture


 what will be the first big sign that the facade of our "recovery" has cracked?

Ignoring the assumption of a recovery at all, I'd suggest what we are seeing right now in the price of oil and gas would consitute a "crack".  Not to mention with 12 of 14 leading indicators pointing south, the failure of our elected leaders to act as leaders while our bureaucrats act exactly as the inefficient, politically protected, tax-raising leeches they are would be yet another crack as America lurches deeper into decline.  But the REALLY BIG CRACK will be when the money becomes worthless.  Prior to the global awaremess that the 'good as gold" currency isn't, we will go on using the same set of denials and can-kicking.  On the day we awake to find that 'Faith' is missing from the the "full Faith & Credit" of all 15 Trillions of USGov Credit, we shall know with certainty that this time it really is different.  When we can't buy more "credit" at Zero%, when rising rates force another tax on the backs of maxed out taxpayers, when the global race to devalue to attain some competitive exporting edge finds all countries winning that plunge to the bottom then we will learn Austrian Economic Theory all together, as a nation, as a world.  Particularly the KaPoom! part.

National Martial law?  I wouldn't think so.  Look at Syria today.  Force can only achieve so much.  It can't create wealth nor coerce productivity.  An American attempt at martial law would invite a 50-state revolution, with the possible exception of Vermont, and of course, the 51st State, the District of Columbia.  Can anyone see the Martial Law Authorities, whomever they might be, getting out the really big guns to pacify the newly impoverished unruly? What will "they" do, nuke Sacremento to provide an example to LA?  Watch Syria to see how this plays out. 

What will Japan look like?  Kyle has the best take on that - shrunken, broken and living with some unpleasant realities.  Saving face will become less important than feeding it.

DavidPierre's picture

Chris Martenson warns of a weak Yen being Japan’s problem going forward – not the strong yen all expect.

gangland's picture

sub-prime sushi

that's beautiful

i quit eating sushi, i can handle pcbs, plastics, lead, cadmium other heavy metals, whatever etc but not radiation...too bad or

..actually prolly good for the planet,

i mean if my poor ass could afford maguro/toro...actually it shulda been a sign of the utter failure of globalization and neoliberalism...

i can live without it, but i'll miss it, i wonder what they'll say in 25, 50 or 100 yrs about my class

eating sushi

and what that consumption ultimately meant for the planet and sapiens

....until fuku came along....

bye bye japan :( at least it wasnt too big a land mass, even though you've now fcuked up the oceans for millenia


possibly for the age of the entire solar system

but if ur japaneses, dont feel bad, it has nothing to do with being japanese

the species is a dead end, an evolutionary mistake,

bound to happen, i mean look, depleted uranium powder never ever goes away and will always circulate in soil or air or water

and whoever did that wasnt directly japanese

it would be cliche to say fuck ldp dpj meti ozawa blah blah

amakudari blah congress regulatory capture ge

rockedyne westinghouse boeing blah blah profits blah earnings blah wall street FIRE eCONnomy

it is what it is cliche or not




how one species can fuck up the very life force on a planet for billions of years is beyond me


mean reversion will be a bitch

gwar5's picture

Boy, Kyle Bass really had Japan nailed a couple of months ago when he said they were looking bad and going down fast.  I think all those million nickels are going to pay off too since I think I read Obama wants to change the composition again or get rid of them.

Temporalist's picture

I don't see what the problem is. Japan just needs to print more.

WestVillageIdiot's picture

Don't think that isn't the plan.  Bernanke, like Cortez, has burned his ships.  There is no going back.  He has a full supply of muskets, musket balls and diseased blankets in his possession.  He is ready to carry out the dreams he has had since first becoming "the foremost expert on the Great Depression".  Soon it will be cold and people will be begging for those blankets. 

Caviar Emptor's picture

Overheard at BOJ....'we cannot lose face....set printer to turbo'

WestVillageIdiot's picture

All central bank printers now have 10Gigabit Ethernet cards and the networks are all running fiber backbones. 

kito's picture

Happy belated birthday to me...... 1 year and 2 days on definitely not the same since my birth into the "real world"......

Cursive's picture


I didn't think you'd stick around, but glad you did.  Since it's your 1-yr. anniversary, celebrate with an extra stockpile of toilet paper or ammo.  ;D

kito's picture

Thanks cursive, How could I not stick around??.....i eagerly anticipate the members only, shtf, told the world so bash at tylers highly fortified compound..........i will bring plenty of t.p.and ammo......

HD's picture

Don't get those confused - or it will bring a new meaning to "shoot the shit"...

Clifhanger's picture

You heard it first, from Kyle Bass. His high strike lotto payers will surely pay off maybe sooner than many expect!


Paracelsus's picture

I can't stop thinking about those Godzilla movies where he goes stomping through downtown Tokyo.

The other thing is that a large part of the Japanese economic miracle was made possible by millions of small savers using a post office savings account which was a brilliant idea.(Saving,what a neat idea!).

If this report is accurate about the Yen/Bond meltdown then I would put a big question mark over the stability of the Asian region (read war).Thank God we have all of our carriers in the right spot!

Atomizer's picture

Heed no fear!! Johnny Sokko has been summoned to the rescue.

Jason T's picture

Give us 20 years, we'll be in the same position.. our oil consumption is already down from 22 million bpd to 18 million bpd in that same period.. some how our GDP is up.  

MeelionDollerBogus's picture

Just wait till this happens to the USD. Won't be waiting long.

mayhem_korner's picture




I agree it will happen, but "soon" is the forecaster's worst enemy.  It's only been 100 years since the formation of the Fed, and 51 since the abandonment of the gold standard.  They can't keep this up forever, but they have more stamina than by rights they should.

If a couple more sovereigns (Japan, Spain, Portugal) go paws up, then it would seem things would accelerate pretty quickly.


WestVillageIdiot's picture

I believe you mean 41 years ago when the room got too cold and Nixon decided he had to close the window.