Japan's Economy Implodes Again: No Scapegoats This Time

While the easily amused were obsessing with choosing the best one line punchlines to describe the status quo posturing on TV in the form of another highly irrelevant political spectacle, Japan's economy imploded, only this time for real. Unlike back in Q2 when every downtick in the economy was blamed on the Tsunami and on the Fukushima explosion, we just got, 6 months later, the report for Japanese machinery orders which collapsed 8.2% in the month of July, for the biggest drop in 10 months, over and above anything seen during the Fukushima days. This is exactly 100% worse than the 4.1% drop predicted. The reasons according to Reuters: "companies are delaying investment due to worries about a strong yen, slackening global growth and slow progress in reconstruction from the March earthquake." Of these the Yen is by far the most relevant. And thanks to the SNB, the Bank of Japan, whose currency has suddenly become the only safe risk haven, will have no choice but to add balance sheet insult to economic injury and resume JPY interventions, only this time the duration will be even shorter than the last such episode which lasted all of 3 days (see below). This in turn will force all other central banks to do more of the same until relative devaluation, and the biggest currency lower, is the name of the only game in a few weeks. As for the winner: the only real currency which can not be printed, well, that story is very well known by now.

More on the latest confirmation of Japanese economic devastation (which nobody could predict):

Core machinery orders fell 8.2 percent in July from the previous month due to declines in orders from manufacturers and service sector firms, Cabinet Office data showed on Thursday. That compared with a median market forecast for a 4.1 percent decline and follows a 7.7 percent rise in June. Compared with a year earlier, core orders increased 4.0 percent in June, much less than an 8.5 percent rise expected by economists. 


"Capital spending remains on a recovery trend, although the overseas slowdown and a possible delay in Japan's post-quake reconstruction are a concern," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.


Japan's current account surplus fell 42.4 percent in July from a year earlier, Ministry of Finance data showed, more than a median forecast for a 31.3 percent decline. The surplus stood at 990.2 billion yen ($12.8 billion), against a median forecast for a 1.18 trillion yen surplus.

Here is why this is extremely favorable for, what else, gold, which has risen $25 since the GOP's orange spraytan colored circus began.

The disappointing data could place some pressure on the government and the Bank of Japan, which highlighted risks to growth after leaving monetary policy on hold on Wednesday, to ensure that the yen doesn't strengthen further. 


The yen has been attracting safe-haven demand from investors unsettled by Europe's sovereign debt crisis and signs of U.S. economic slowdown even as Japan struggles with its own debt burden and its new government faces a long battle to gain consensus over how to fund reconstruction from the March 11 earthquake and tsunami.


"Uncertainty on overseas economies started to increase in July, which may have prompted some corporations to rein in their capital spending on lower expectations for business growth," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance in Tokyo. 


Japan is on guard against further yen appreciation after intervening in currency markets last month when its currency approached a record high versus the dollar

As for the recently popular theme documenting the collapsing half life of central bank interventions, this chart speaks volumes.