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Japan posts record Y2.79 tril January trade deficit

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Switch to nukes back on.......

-1 ( +6 / -8 )

Japan’s yawning deficit marked the latest worrying news after its sizzling GDP growth in the first half of last year slowed to a crawl in the fourth-quarter,

The "fat lady" may not be signing just yet for Abenomics, but she sure is humming awfully loudly.

5 ( +7 / -2 )

Read the article just once but didn't come across anything too bad or too long term worrying.

Most of the trade deficit comes from higher fuel bills because of the shutdown of the nuclear power plants. This is correctable when they go online, eventually, after the new nuclear watchdog finishes their stricter due diligence. Much more important for optics is that the nuclear watchdog be seen to do its job fully, without being hurried by the government, even if TEPCO et all bleeds a lot of red in the meantime.

A bigger worry for me is inflation expectations down the line, but this is the mirror image of deflation that Abenomics sought to solve. To the extent that deflation is licked then congratulations, problem solved. Another issue, another solution, another day.

The other big worry is how to get company profits to filter down to actual paychecks. Raising the minimum wage should be politically popular, but care should be taken to decide to which level. You raise it beyond a certain level and you kill more jobs in order to hand a pay increase to fewer.

What Japan really needs is to unshackle its entrepreneurial energy. In the US talented workers have the option to move to a startup for lower pay but greater eventual upside. Talented workers in Japan do not have this option so employers do not need to pay them higher to stay. Of course, Japanese change jobs much less often, to start with. Although lately, in lieu of pay increases, Japanese workers change jobs every 3 years for an effective 1 Million JPY pay increase. I think that's progress.

1 ( +4 / -3 )

I read it only once, but I see no reference to how much the government spent so far to put a patch on Fukushima's situation. And I'm sure they are not going to show it to you, as then people would ask why those costs are not computed into the fake cheap 'nuclear' bill… TEPCP is public now. ;-)

0 ( +1 / -1 )

The beginning of the end for Abenomics! Wait until the sales tax hike comes into play and Japanese goods get even more expensive. Fail!

4 ( +9 / -5 )

We need nuclear power to stay afloat.

0 ( +7 / -8 )

sengoku38 - We need nuclear power to stay afloat.

Um, I guess you are quite happy to pay the trillions of yen to repair the damage done by the last nuclear accident and to have more trillions of yen spent on upgrading the current plants, aren't you? Nuclear energy is NOT cheap or safe! When will people get this through their thick skulls? Japan needs to focus on renewables and stop trying to peddle that failed technology of nuclear power.

-2 ( +7 / -8 )

Abenomics!

What a success story!

Economically, the country is about to collapse. As others have mentioned, the tax hike will deal a heavy blow. TPP, which Abe desperately wants, will hit the jugular and the huge numbers of unemployed will finish the job.

Thanks to Abe, relations with China and NK are strained. And with a vacuum in the bank, he has pledged to buy military hardware from the States, build them a huge new superbase in Okinawa and initiate massive public spending.

This guy is dragging the country down.

Doesn't anyone care?

6 ( +8 / -2 )

There are New Year holidays in January so there is a tendency for less (weak) exports and more (strong) imports so the trade deficit is likely to increase. The deficit should shrink towards February and March.

-1 ( +0 / -1 )

"Economically, the country is about to collapse."

With 1.6% GDP growth, the highest in 3 years? A collapse of an economy as it expands, eh. Interesting. Got a time frame for your astute prediction?

"Abenomics! What a success story!"

1.6% growth ain't bad, given the shrinking population. Better than Europe's.

-7 ( +3 / -10 )

Weak yen only hurts me as paid in yen. Prices rising, and money I send home amounts to less,,, Was sitting pretty when the yen was 74 to the dollar. I don't know anyone benefiting from the low yen.

0 ( +3 / -3 )

Get ready for a roller coaster ride down the tubes! It is coming....

0 ( +0 / -0 )

JeffLee - Yeah, there has been some growth, but it is a false security. There is nothing to back it up. The Japanese economy is on a knife edge and Abenomics are pushing it to the end of the blade.

0 ( +5 / -5 )

No end in sight despite Abenomics and massive monetary easing?

1 ( +2 / -1 )

Note that the 1.6% GDP growth is in yen terms and we all know what has happened to the value of yen. Therefore, in dollar terms, Japan's GDP has actually collapsed.

3 ( +4 / -1 )

"Note that the 1.6% GDP growth is in yen terms and we all know what has happened to the value of yen."

At around 100 to the dollar, the yen is in a normal range, historically speaking. Anyone who thinks the 70 yen rate in 2011 was "normal" needs a serious reality check.

"Japan's GDP has actually collapsed."

Actually....Japan's population is shrinking. As the GDP figure is not adjusted for population growth, the figure would be over 2% if Japan had positive population growth like the US or Europe.

-4 ( +1 / -5 )

JeffLee,

Whatever you say, prices are rising and salaries are staying the same.

Only government workers and a few company fat cats are getting bonuses.

On a grass roots level, I can't see anything good happening in the Japanese economy.

0 ( +2 / -2 )

On a grass roots level, I can't see anything good happening in the Japanese economy exactly, steep and continues drop of TSE is yet another supporting proof of it.

0 ( +1 / -1 )

If things have been that easy, abenomics?

Japan has no influence or power to force its currency on others through the control of the ME oil cartel, mainly Saudi Arabia, hence Japanese Yen will never be like US$, the world currency that others must hold to buy oil. The impact of inflation should have been well known if Abe would spent more time on economy 101.

With zero interest rate, an aging population, an ever increasing huge country debt load mainly carried by Japanese today, the grass roots will no doubt continue to lose their shirts with inflation while the corporate elites will get richer.

The working on currency swap by Japan, Korea, and China would have been good for the three countries, but now it is dead in the water thanks to Abe's abenomics and his hawkish behaviour towards his neighbours. You reap what you sow.

0 ( +1 / -1 )

globallcFeb. 21, 2014 - 03:02AM JST Japan has no influence or power to force its currency on others through the control of the ME oil cartel, mainly Saudi Arabia, hence Japanese Yen will never be like US$, the world currency that others must hold to buy oil.

I wouldn't take Japan lightly. With Combined Japan and U.S. financial sources, there is a strong formal or informal influence on World Bank and the Asian Development Bank through official decisions of the board of executive directors and informal influence of flow of funds by other channels. Controlling for commitments are linked to the interests of the key shareholders in Japan and the U.S.

-1 ( +0 / -1 )

The Japanese yen has been one of world's best currencies to hold over the last several decades. If you believe the yen is "funny money" or "debased," or that the massive money printing has diluted its value, then you're living on a different planet from the one I live on.

-2 ( +1 / -3 )

If only past performance were a guarantee of future returns.

0 ( +0 / -0 )

Bertie, have you noticed the crowd of Abenomics apologists is rather solitary? Stockholm syndrome, perhaps?

0 ( +0 / -0 )

"Bertie, have you noticed the crowd of Abenomics apologists is rather solitary?"

Bertie, have you noticed the crowd of people who aren't necessary opposed to Abenomics cites facts and real events (forex rates, GDP growth, etc.) to support his views and confirm his predictions, while the critics spout a stream of paranoid delusion (non-existent "hyper-inflation," non-existent debased yen, non-existent sovereign debt crisis, etc)?

Anyway, when are your fantasies actually going to come true, eh? Like, the Japan economy collapsing from debt? Come on, give me a time frame.

-2 ( +0 / -2 )

In all walks of life and especially with the financial markets, its usually the loud majority that is the "simple simon" view and the ones who can provide an objective realistic view are the minority. Multiply this ten fold when it comes to JT posts.

-1 ( +0 / -1 )

Wow, even with weaker yen! So much for Abenomics.

-2 ( +0 / -2 )

JeffLee,

As I said in my prior comment, past performance is not a guarantee of future results.

Consider your forex rates. In nominal terms the yen may have been strong until mid 2011, but adjusted to inflation in other currencies such an argument is dubious at best.

GDP growth? The government seemed to be "successful" through the 2nd Abe arrow, but come 2013 4Q we found that growth was pretty dismal. Spending money is easy but it seems that it doesn't produce sustainable growth (but I'm happy to wait for data for this quarter).

Some facts which I haven't seen you talk about. Japan in the past had been running persistent current and trade balance surpluses. Together with a deflationary environment these realities were a powerful tail-wind for the yen.

Yet none of those 3 characteristics really exists today. Recent record trade deficits are indeed factual and exist in reality not fantasy, the broader current account balance is showing similar tendencies, and the government is now aiming for 2% inflation.

Given the fundamentals underpinning the yen have changed and may continue to change, past history no longer counts for anything.

As for the debt issue, today the BOJ governor is (once again) in the news warning that the government needs to take care of its finances or possibly face serious consequences.

http://blogs.wsj.com/japanrealtime/2014/02/21/boj-beat-kuroda-warns-of-critical-problems-without-fiscal-overhaul/

Japan is in a tough spot. Spend more to boost GDP and play chicken with the financial markets, which the BOJ governor is constantly expressing concern about, or cut spending / raise taxes to get the fiscal house in order with negative consequences for GDP. The options aren't great. The only other option is growth through structural reforms (or pray for growth in overseas markets), but Abe has acheived basically nothing in this space yet.

Anyway, when are your fantasies actually going to come true, eh? Like, the Japan economy collapsing from debt?

No explicit time frame was given by Mr. Kuroda, either. It doesn't mean that the risk does not exist.

0 ( +0 / -0 )

Fxgai

I appreciate your response. It seems the others cant, wont respond, or whatever.

"Spending money is easy"

Spending money is what the govt does. Thats how the money it issues enters circulation. Every yen in the economy came from a single source: the govt.

"Recent record trade deficits are indeed factual and exist in reality not fantasy"

Yes, they are, and I dont dispute that. What exactly is the damage these deficits are creating? Inflation? Mass unemployment? Bond crisis? Nope. Basically all the rich countries run deficits, as their GDP growth slows. But hey, theyre still richer, arent they.

"Past history no longer counts for anything."

Which would mean that Zimbabwe and N. Korea could have really bright prospects, since their past history is completely divorced from their future, right? No, a track record is a track record and it counts for a lot. That’s why Japan enjoys the world’s lowest bond yields: faith and trust from investors worldwide.

"Japan is in a tough spot."

As people have been telling me -- for the last 15 years. So wheres the crisis? I live here, but have yet to experience one. 2008, yes, but that was caused by America’s unregulated financial industry. Nothing to do with Japanese govts fiscal-monetary policies. Well, here I am waiting for the crisis, Im waiting, and waiting...

0 ( +0 / -0 )

The beginning of the end for Abenomics!

lol, great comment. I wonder how one can get this idea when it's a sign that situation is completly opposite.

1 ( +1 / -0 )

Spending money is what the govt does.

That much I agree with :)

Thats how the money it issues enters circulation. Every yen in the economy came from a single source: the govt.

This part is not really the case. The Central Bank (which is supposed to be independent) is where currency is issued. Although these days the government just issues debt which the market then sells to the BoJ, for the most part, so to that extent I can agree. But that's not the way it should be. Government's have laws against central banks just printing money willy nilly to finance the spending of the politicians of the day, I'm guessing there are pretty important historical lessons that led to that being the case.

What exactly is the damage these deficits are creating? Inflation? Mass unemployment? Bond crisis? Nope. Basically all the rich countries run deficits, as their GDP growth slows. But hey, theyre still richer, arent they.

I believe Japan's currency has been strong until recently because it was enjoying trade and current account surpluses.

As with the decline of the US dollar, I would expect the yen to continue to depreciate over time if the newly minted trade and current account deficits are here to stay. A weaker currency over time will result in higher prices especially in Japan where there is no great self-sufficiency in food or energy resources.

Which would mean that Zimbabwe and N. Korea could have really bright prospects, since their past history is completely divorced from their future, right?

Well we are talking about Japan, which used to have trade and current account surpluses, which now has trade and current account deficits. (Zimbabwe and North Korea could have good prospects if their fundamentals were to change for the better, I hear places like Myanmar are popular amongst some investors these days)

That’s why Japan enjoys the world’s lowest bond yields: faith and trust from investors worldwide.

I think that's a dubious claim. Around 90% Japan's debt is owned by domestic entities, whereas in other countries debt is typically 50% owned by foreigners. If the JGB market were left to foreigners I doubt very much that yields would be as low as they are.

The big credit rating agencies are not exactly a barometer of good judgement, but even they have Japan's sovereign debt rated alongside that of places such as Qatar, and well below minnows like New Zealand.

Why do Japanese investors buy so much sovereign debt? I suspect there is some "Japanese culture" and "togetherness" involved.

So wheres the crisis?

Shhhh!

But seriously, if you go back over the duration of my still relatively short lifetime there have been plenty of financial incidents here in Japan.

0 ( +0 / -0 )

The crisis is Japanese debt of course. What happens if QE stops? The money lessens and as a consequence interest rates will rise on Japan's debt of a quadrillion yen The interest on this debt is unplayable. The Japanese govt defaults and confidence in the yen fails On the other hand QE continues indefinitely and inflation rears its head making the yen but not yen assets worthless

A poison pill in both hands.....

0 ( +0 / -0 )

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