Japanese businesses brace for life with interest rates

"We're in the import business so the weak yen has been causing us a lot of trouble when we go overseas," he said. Purchases that used to cost the equivalent of $6,700 now cost $10,000 he said.

Not like the bubble years when almost every Japanese girl had one or several designer bags

Now, millions of Japanese, from small business owners like Kanoh to first-time homebuyers, are sizing up how to adapt to higher borrowing costs after the long, lean years of deflation, when prices, wages and the cost of money changed little.

Nice try at obfuscation by the corporate mouthpiece Reuters but one thing that has benefited in the 'fight against deflation' are the value of large asset holders.

https://jacobin.com/2017/01/rich-universal-basic-income-piketty-passive-income-capital-income/

QE policies were a massive gift to them as the overall economy was moribund and the majority saw a decline in living standards.

*...after the long, lean years of deflation, when prices, wages and the cost of money changed little*

I have to disagree with assertion. Prices have gone up considerably these past ten years.

Take a NAP for a while and do not borrow any $$. See where this storm will end going then decide the next step.

Borrowing any money now or for the next 12 months is a bad move, the BOJ will watch and see the market reaction then take the next step and that will take time, so do the SAME.

But word of the loan soon got out and associates and competitors assumed the company was in trouble.

Dang. What is with this thinking?

Probably more like a competitor wanted to tarnish his name.

hoard cash and cut costs.

Great advice for an individual, but if everyone does this, the economy stagnates.

Might be time for the dude in the photo to pass the mantle to the younger generation.

Thousands of non-competitive or zombie companies have been propped up for decades with this free money. This has been good for overall employment statistics, but it has meant stagnant wages for the vast majority of the workforce, and a stifling of actual competition. Of course increased rates is going to kill many businesses, but thats what happens when you kick the can down the road pretending everything is fine for 30-40 years.

Article is a nice bit of Japan Inc. propaganda which like other recent issues has little bearing to the economic landscape of Japaneses labour.

Japanese companies have long stuck to a commodity deflation and BOJ QE policy asset inflation : hoard cash from record profits and cut costs form labour benefits and wages. That left the labour economy in a vicious cycle of moribund growth and falling wages versus real cost of living.

Fixed it for you.

The reality is:

https://www.theguardian.com/business/economics-blog/2016/sep/28/quantitative-easing-qe-pernicious-effects-favour-wealthy-tax-middle-class

Dude is 76, he should just sell his business and retire especially if it is not profitable enough to keep going.

I have a friend who is 85 and runs a major transport company that employs more than 20 families. He won't stop for their sake.

Just the beginning, Kishida will print more money to buy weapons to US....

TAX increases are coming btw!

I have a friend who is 85 and runs a major transport company that employs more than 20 families. He won't stop for their sake.

I don't know the details of this random anecdote but that seems to be the general narrative that the article is trying to push, and that fits with the policy of monetary easing supposedly having a trickle effect to help wages.

If you believe in the munificence of these corporate execs and a trickle down effect good on you.

More likely and that is largely seen is the profit hoarding of Japanese capital hoarders as the share going to labour is pared to the bare minimum with non-living wages.

https://www.reuters.com/article/idUSKCN1Q709W/

These firms are the massive beneficiaries of LDP/BOJ macroeconomic policies and acquisitive hoarders of the benefits.

My friend with the transport company pays above-average wages and during the pandemic didn't lay off a single worker.

If Japanese companies were suddenly forced somehow to pay living wages, I reckon 90% of them would go bankrupt.

My friend with the transport company pays above-average wages and during the pandemic didn't lay off a single worker.

Then undoubtedly a black swan, a dodo just about unheard of in the Japanese corporate landscape.

Not casting doubt on your anecdote and such a saintly corporate exec may exist.

Just very very rare and not in the experience of 99% of workers in corporate Japan.

Really, Japan has and remains better off than many other countries with interest rates above 5 percent and Japan one WHOLE percent. Yes, prices are climbing, however, not as fast and or as crazy as N. America. Blessedly, fruits and vegetables are still reasonable and in abundance in all 4 seasons, you can go to the supermarket after 5 and get plenty of deals on obentos and other fresh food items like fish from 30-50 percent off something N. America does not do. Saving money, eating well and living an affordable life is not impossible if you live within your means.

Hagiwara has only taken out a big loan once, about a decade ago, for around 100 million yen to buy the building for the company headquarters.

But word of the loan soon got out and associates and competitors assumed the company was in trouble. Hagiwara then decided to pay it back in full, which he did within half a year of borrowing the money.

So now Hagiwara-shacho is in possession of a company headquarters, valuable assets and property due to BOJ easy money negative interest rates thanks to the Japanese treasury powered by real Japanese labour and not a QE asset bubble.

Sounds like a basic income for the rich.

Imagine if the average worker could have such easy money with negative interest rates to leverage or invest in speculation.

>

100 miilion yen (previously about 1M USD) is not a big amount to spend on a building for a company that employs twenty. That is not extravagance. It's probably just a big garage/warehouse with an office at one end.

If someone asked me about corporate welfare in Japan, I would point to the airlines, big pharma, etc. not tiny manufacturers of specialist products. The acrylic panel guy probably sells everything to Lixil or a housemaker, who dictate the price to him.

I have a friend who is 85 and runs a major transport company that employs more than 20 families. He won't stop for their sake.

….

Does he want to die at his desk or out in the sun grilling meat?

This is a major problem with the Japanese and is seen in all companies here and politics and in the medical field.

Instead of training up the next generation, the entrenched sachos just keep going until they literally drop dead taking down the company with it.

Really, Japan has and remains better off than many other countries with interest rates above 5 percent and Japan one WHOLE percent. Yes, prices are climbing, however, not as fast and or as crazy as N. America. Blessedly, fruits and vegetables are still reasonable and in abundance in all 4 seasons, you can go to the supermarket after 5 and get plenty of deals on obentos and other fresh food items like fish from 30-50 percent off something N. America does not do. Saving money, eating well and living an affordable life is not impossible if you live within your means.

The Anglo countries are seeing a massive transfer of wealth to boomers, boomer descendants, and those who've had spare cash to speculate through massive house price inflation. It is the definition of zero sum, and since housing is a basic human need, its a game all the losers are forced to play. Japan is well off without this phenomenon.

However, I think many Japanese would disagree on the above statement that "fruits and vegetables are still reasonable and in abundance in all 4 seasons". What may seem like low prices are still high when you're a nursery school teacher working long full-time hours but only pulling in 130,000 a month after offtakes.

Japan should consider emulating whatever South Korea is doing as wages there are now higher than Japan.

His company, Shinshi Co, has about 100 million yen in loans now, but that's at a fixed rate.

??? Which means that his payments wont be going up. I guess Reuters did not mention that.

Just the beginning, Kishida will print more money to buy weapons to US....

The other way around actually.

Japan should consider emulating whatever South Korea is doing as wages there are now higher than Japan.

Not quite sure if that same model works for Japan, different countries, consumer needs, and supply versus demand, demographics, not to mention South Korea is facing its own challenges that are slowly crippling their country as well.

https://www.aa.com.tr/en/asia-pacific/south-korea-s-suicide-rate-highest-among-major-advanced-nations/3144680

dagon

there are always exceptions.

dagon

my friend is not a corp exe, just a hard-working owner of a business that needs to meet the monthly payroll.

And how many business have you built?

Two, possibly three if I wanted to big myself up on LinkedIn.

If you read the story before jumping to the comments, you'll see it talks about several people. The guy who borrowed 100m for a building "owns a Tokyo-based designer of water treatment equipment". He does not make acrylic panels. That is a different person in the story.

For people with no knowledge of building in Japan, 100m yen gets you very little if you need something for twenty employees. I've spent 80m yen myself and that was simply building two houses, one of which is very big and would probably cost 80m on its own at 2024 prices.

Meanwhile, the rest of the world has been dealing with interest rates for decades.

Just showing that zombie companies need to die and that assets have inflated for some only.

Shinshi Co.,Ltd. was founded in 1952. The Company's line of business includes the manufacturing of plastics products.

after so many years in business, you are in debt for 100 million, and now you got no money to purchase new machine. Maybe you need to seriously think there might be something wrong with your business strategy / plans

I have a friend who is 85 and runs a major transport company that employs more than 20 families. He won't stop for their sake.

seriously, working at age 85 is not a good idea both for his own family and his employees. They must be living in fear everyday worrying what time their boss will be unable to work (touch wood). Just pass the business to someone else capable or his own son, this is the best gift he can offer to his loyal employees

Japanese businesses brace for life with interest rates

jeeeessss! Welcome to our world where EVERYTHING is either taxed 10% or charged an interest rate!

MarkToday  02:23 pm JST

I have a friend who is 85 and runs a major transport company that employs more than 20 families. He won't stop for their sake.

seriously, working at age 85 is not a good idea both for his own family and his employees. They must be living in fear everyday worrying what time their boss will be unable to work (touch wood). Just pass the business to someone else capable or his own son, this is the best gift he can offer to his loyal employees

He has no son/daughter to take over the business. Unable to find a buyer. He is thinking of closing the business this year.

An interest rate of 0.1% isn't even interesting. That level of interest is simply not worth your attention.