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Japan's inflation unchanged at zero in February


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Abenomics fails again. No pay rise = no inflation.

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Very difficult to judge Japan's economic situation/outlook from this one data only :(

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No pay rise = no inflation.

You have the equation wrong.

In normal economic conditions, increased demand causes an increase in prices, an increase in prices causes and increase in production, an increase in production causes a shortage of labor, and a shortage of labor causes an increase in the cost of labor, and an increase in wages. This is called "demand-pull" inflation, and occurs when the market increases.

Abe is cheating. He is trying to cause inflation by simply devaluing the currency. It is like mixing water with whisky; the resulting mixture may fill an extra glass or two, but it will take an extra glass or two to get you drunk. This is called "cost-push" inflation. The problem with cost-push inflation is that even if prices go up, and wages go up to match, the end result is.... nothing, nada, zilch, because the price and wage increases negate each other. For most of us, cost-push inflation is meaningless, it does nothing at all to improve our standard of living.

The only purported beneficiary of cost-push inflation is the government itself, which needs whatever inflation it can get to devalue the weight of it's debts, and maintain it's ability to buy votes and favors via massive spending. But even this is a fallacy, because the money borrowed or printed to cause cost-push inflation is added to the weight of the debt, negating whatever gains were made by devaluation. As I have said before, it is like trying to save a sinking ship by drilling holes in the bottom to let out the water.

Once again, deflation is not the problem, it is the symptom. Deflation occurs when supply outweighs demand; demand decreases when either there is too much of a product, or the price of the product is too high for consumers to buy. Non-competitive business practices in Japan have pushed prices too high, creating a two-fold problem of decreased demand and population decline.

There are only two options to address the problem. The first is to make the economy competitive, by eliminating the masses of red tape, bureaucracy, tariffs, taxes, corporate collusion, price fixing, and the basic corruption of the political/business/education establishment. The second is to continue following the current path, which will eventually cause the system to collapse under it's own weight, achieving the same end, albeit much more painfully.

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@sangetsu03: good post. I would add that it is my observation after many years here that Japanese prefer not to upset internal stakeholder and will wait out a problem if possible. Like reform in farming, there are logical options, but they prefer to wait 50 years until the noisy stakeholders are retired or dead.

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sanget - succinctly stated.

Those in power know this, but are trying to have their cake and eat it too. ie please the masses (re-elected) while keeping the corridors chumminess - well chummy.

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Gee, Dear Leader Abe! So, four years into your promise of 2% steady inflation rate, you're only....2% away from getting a 2% inflation rate!!

Keep up the good work! Signed: Nobody who has a brain!

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There is one other thing which people don't realize about the type of inflation the government is trying to cause.

In the past, gold and silver were used to pay all bills. In those days kings and the nobility loved to spend every bit as much as politicians do today. And, similarly, they borrowed lots of gold and silver to pay for their extravagant lifestyles, to fight wars, etc. But they discovered that by coining money from gold and silver, and then reducing the amount of gold or silver these coins contained, they could more easily pay their bills and debts. In the early days, 1 British pound was the equivalent of 1 pound of silver. How much silver will a British pound buy today?

The effect of this diluting the precious metal in coins decreased their worth, which meant more such coins were required to buy goods or pay for labor. In the beginning, the kings found a way to pay off their debts more cheaply, but the market would respond in due course.

Causing inflation by diluting the value of currency is a tax, period. The government can call it "inflation", or, even more euphemistically a "price stability goal", but what it does is transfers the value of the people's wages and savings into relieving the weight of government debt.

The ironic thing is that as government has become one of the largest consumers of GDP (which contributing a lesser portion in return), that even though it can try through devaluation to inflate away the weight of it's debts, the government still must use the same devalued currency to pay it's bills, which means their purchasing power is diminished in-step with the national debt, requiring them to borrow and spend more to maintain current levels of spending.

Are they really this dumb? But then someone once said: "Why don't governments learn? because governments never learn." Whether this is intentional or not is irrelevant.

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stressing the weakness of Japan’s overall economy, which contracted during the final three months of last year.

So why is the freekin Yen getting stronger? The economy is a shithole.

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So why is the freekin Yen getting stronger?

Because all developed countries are are up to their armpits in debt, all have stagnant economies, all have pushed taxes to the maximum, and all have found that the only option they have left to continue their wanton spending ways is to devalue their currencies.

The yen is not getting stronger, competing currencies are getting weaker. The yen is strong because compared to other developed countries, Japan's society, demographics, and spending habits during times of crisis are much different. In other countries, money printing, negative rates, and pointless stimulus programs are likely to cause people to spend their money before it loses it's value. In Japan hard economic times mean people sit on their money, and don't spend it. This keeps the level of money in the economy stable, and also keeps it's value stable. The government doles out money, and rather than spend it, the mere fact that things have gotten so bad discourages people from spending that money. Spending it wouldn't help anyway, the most an increase in spending would accomplish is a short delay of the inevitable. People would rather have the money than spend it on more things that they don't really need.

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Inflation, was defined, as simply, "an increase in the money supply" by Webster's Dictionary, before the government changed the definition to, "an increase in consumer prices", as measured by the Consumer Price Index. Problem is, the CPI doesn't measure financial inflation: an increase in the price of stocks, bonds, and real estate in particular. Since the US dollar is the World's Reserve Currency, and is no longer backed by gold, there is no constraint on how much governments can print, and they can deceive the common person into thinking their currency is not sinking because they are all measured against each other. This has been going on for so long, that people can't see it without going back decades. The US is the largest debtor nation in the history of the world, and Japan has the highest debt to GDP ratio of any industrialized country in the world. When you have debt, you cannot pay back, the easiest way is to default is to print up your fiat currency ( paper backed by nothing) and tax your people through their loss of purchasing power. The propaganda machine of central banks and governments, is that inflation is good for the economy. See Argentina or Brazil to get a glimpse of what happens when governments want more inflation, but can't put the genie back in the bottle.

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Excellent posts by sangetsu03! Abe is an economic imbecile, listens to a bigger one, Krugman. The Nobel prize is worthless recently, at least in economics.

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Abe is an economic imbecile, listens to a bigger one, Krugman.

Abe is a politician, and he does what every politician has ever done; spend other people's money. He is no more or less honest than any other politician (which is to say "dishonest"). Like any other politician, he makes promises, and fails to keep them, and like any other politician, he seldom has to worry about the consequences. That is the world of politics. Performance and results don't matter, because failures in either can be blamed on the opposition (which is why oppositions exist), or on "external forces", like China or cold weather.

Krugman and his kind are far worse than Abe. Krugman is an ideologue, and so far no manmade ideology is compatible with peace or fundamental reality. Greed and ambition are common enough traits, and are often more helpful than harmful in moderate degrees. But when combined with, or fueled by ideology, they can become extremely dangerous. Ideology is the tool of preference for tyrants, and has caused more violence and unnatural death than anything else. The most peaceful and successful system is that were there is no official ideology; spiritual, political, or economic.

If Japan's economy goes to hell in a hand basket, expect ideology to raise it's ugly head in for form of nationalism, socialism, or militarism, to be used as a tool order and control.

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Many countries have "saved" their economies by selling goods overseas. Japan should seriously consider opening up shop in foreign lands if it could help in the battle for inflation.

Abe and his government should do their part by buying as many goods as possible.

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Technically the term "data" is plural...just saying.

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