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Excess savings not helping consumers in Japan as inflation risesTOKYO
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"Excessive monetization of debt not helping consumers in Japan as inflation rises" should be the title.
I perfectly understand why the BoJ does it. The Yield Curve was broken around last month to reach 1% which was alarming. If Japan's yield curve control is abolished, then the market will dictate the JGBs and Japan itself must service its bond repayment obligation which is impossible for the current level of debt. This will lead to the worst-case scenario that Japan defaults or the credit rating agencies downgrade Japan to a speculative level. The credit downgrade is the worst consequence imaginable as Japanese financial systems won't be able to rally finance sources from foreign currencies because the JGBs can't be used as collateral.
The latter possibility is more probable because there was a Nikkei Asia article indicated how all Japanese banks are very close to being rated as speculative, and they're looking to exit from Japan.
Anyway, Japanese people and companies are saving excessively because all of them are highly indebted, especially the companies. The companies likely have non-Yen debt obligations that have been compounding up since the bubble era. Japan Inc, the Ministry of Finance, and the Bank of Japan conceal this fact since they want to keep a good image to lure gullible Asian investors (mostly Chinese) to pump money into Japan. These Japanese companies are saving cash in Yen, not for investments, but for probably paying down the non-Yen debts of the bubble era to the new non-Yen debts.
The journey of YCC is coming to an end, so Japan will choose to either default, accept a credit downgrade, or both.
Japanese people are smart when it comes to their financial choices, many have no debt and pay cash for their items and don't live beyond their means.
Since my move here many years ago I have followed suit, savings, pay cash and if I use credit and it must be something I can pay for at the end of the month zero debt. Many in N. America and I am sure in many other parts of the world survive on credit and can never get out of debt.
When business to decide to pass on the higher costs there will be families who can no longer afford to eat
Thus, ending the cycle hinges on companies giving wage hikes in line with their earnings growth. But they are refusing and hoarding instead. Can't think of a better time for the govt to hike the corporate tax and lower the consumption tax.
"May"? The govt can easily verify this by looking at inflow trends for NISA, IDECO and private pension plans.
This is why people should read Marx. He brilliantly identified and explained this contradiction of capitalism over 150 years ago. No wonder that today a certain communist state will soon be the world's dominant economic power.
More BOJ selective short term memory loss.
As if decades of wage stagnation as corporate profits remained steady or rose would be reversed if companies just raised prices.
More BOJ late term senility they hope is reflected in the electorate.
Decades of QE monetary easing UBI for large capital holders has not trickled down. But they are committed.
"Excess savings!" I guess the assumption by the Cabinet Office is that people shouldnt save and spend all their money so they go into debt too.
It is a well known fact that the average Japanese consumer saves money, particularly when the economy is not stable, and people dont see any prosperity on the horizon.
Really now, a "communist state"? It's about as communist as Japan is a democracy.
Sorry, but I am still searching where my excessive savings due to Covid might have gone before they even reached me. lol
The time where people will be forced to go and spend even their last saving is coming! Is just a matter of time..
How about excess salies for useless Politicians and Government waste on illegal Bribes and corporate extortion?
One of the only solutions I can come up with is that companies start massively reducing their work hours so that their employees can take on additional work (sounds horrible). If the average worker has no spare labour hours to sell, how can they earn enough to get by? We all know how unproductive a lot of work hours can be here, so its about time businesses admit this, and start to change the way they do work.
Unless inflation can come down at a seriously fast pace, outlook is pretty grim. I certainly dont like the thought of both myself and my wife, both full-time salaried employees, being unable to save for our retirement and our childrens future. Extra work might be the only option though.
It would have been interesting to learn in this article how much savings Takahiro Average or households in Japan have. I cannot imagine it‘ll be so much considering the comparable low wages.
Savings during covid19? I blew through all my savings during covid19 I guess they are talking about the LDP members savings during covid19.
older generation doing it in old way.make money,save money,than spend less than get means make a savings.as times are hard for many and salary hike is a dream for majority,while literally everything costs more-they are starting to use their savings.but yes-still thinking abt very next days.so spend less.
young generation naturally makes less but approach is different.they see ads for nice things and they want these now.with little or no savings buying things by credit.but yes again as everything costs more a credits have own interests-power to buy more fading away.at the end they are forced pay back credits so no room for extra shopping.
makers wants to make a profit but still looking for excuses why cant pay to own workers and all is about their mindset and greed they wont change.in other words all of us will pay for goods gradually more but incomw will not increase for many-so people will spend money for most necessary things only while profits of corporations will stay.
Japanese people are really savvy when it comes to their finances paying cash, keeping their debt low and not using their credit so much.
I have learned a lot from living over here, zero debt, if I use credit it is paid at the end of each month, and I have savings for that rainy day should it happen.
Many in N. America live from paycheck to paycheck, have credit cards that they can barely pay the minimum payment each month and where they pay huge interests to the banks.
Japanese people should be commended for living within their means.
Somehow they will find a way to dig their hands into those savings…frozen bank accounts is not impossible see the example of Argentina…sure japan is not Argentina but when the water touches your ass any option is not to be excluded!
Yield curves, overnight rates and JGBs don’t mean much to the millions of average people but the price of food and clothing etc does.
So, what do I see going on?
There are plenty of Japanese in my neighborhood that have reformed or built new homes and it is ongoing.
I see new cars being bought too.
Those doing so are employed.
Those with jobs can access low cost loans.
Conspicuous consumption is another matter.
The days of every lady with a designer bag on their arm is over, for sure.
Window shopping is the norm.
Certainly the entertainment venues that I frequent have several staff on hand but no customers in the door.
Plus several foreigners I know with bars and restaurants here in Kobe take off for a couple of months as trade is so dismal.
The trickle down has not occurred and it doesn’t look likely to either…
If the government is serious about stimulating the economy by increasing consumption, the answer is quite simple: abolish the 10 percent consumption tax. Since they’re a far greater number of low income and middle income households with greater propensity to spend money than there are the super rich, the effect on the economy will be immediate and far reaching. But, of course, Kishida and the Ministry of Finance will never do that.
Excessive savings - yeah right, same with that 4% inflation my electricity bill is now 100% more from what it was compared to pre-you-know-what level.
"Excess savings" Excellent example of Doublespeak. Nailed it.
Let's not forget that Japan had the largest speculative asset bubble in the history that it still hasn't recovered from. Japanese people are living their means because of pervasive deflationary mindset and restrictive credit policy from the banking system. Both are slowing the economic recovery along with low productivity. And no amount of QE will solve any of these.
China is run entirely by communists. State-owned firms account a majority the market capitalization in the economy. The govt's goal is to bring this to as close to 100% as possible in its ultimate goal of creating a "Marxist-Leninist state with Chinese character," in the words of the manifesto of the last Party Congress.
You may not think China is communist. But the people who run it certainly believe it is.
Septim You live in a dream world. Japan is a creditor nation. Look it up! The world owes Japan trillions of dollars. If they downgraded Japanese banks to speculative, they would be downgrading the world economy to speculative. Get your facts straight.
Bureaucracy and regulations are also the slow death of the country where ideas and innovation get trapped.
How about the startups and unicorns in Japan?
Where is the VC and the vehicles to invest for the wider public?
And why does the civil service here use inordinate amounts of paper…?
the most “value” you get for your cash is spending it all the second you get it. Which generates immediate revenue for the government.
you save 50,000 yen to buy something? by time you do, it’s 70,000 yen and your 50,000 only has 40,000 of buying power.
As far as Japanese saving money, I first came here over 40 years ago, and saving may have been a thing back then a a little now, but in recent years, I have seen so many people that just don't have a big savings account, but no wonder, because even here in Japan, it is spend and spend when you can, young people are lined up at Starbucks buying 700 yen coffee and the another 500 yen for a very small piece of cheesecake, When I was young, it was save save and save with sometimes a little spending blowout. I'm just saying, don't confuse the older generation with the very young people now.....I know ..I know, that is what they said when I was young :))
It's not that hard to find on your own really:
As of 2021, average savings held by households comprising two or more people in Japan amounted to approximately 18.8 million Japanese yen, an increase from around 16.6 million Japanese yen in 2012.
On top of rising prices, the drop may reflect "growing concerns about future pension benefits and the sustainability of the nation's social security system due to the aging of its society."
So after decades of deflation, all the so called experts at Cabinet office, BOJ and economic think tanks trotting out their idiotic nonsense about J -customer not spending because 'deflation made people hold on to their savings in expectation of prices falling further, which was govt default go to mantra. Now these same twits are explaining public not spending in their long wished for inflation nirvana by ' concerns about pensions & security system stability. As if these concerns suddenly just surfaced within the last 12 months or so with rising prices. Government political deadwood atually doing something about J economy,s decades long structural problems and ensuring a substantial increase in the stagnating wages ( thanks allmighty LDP ) is too hard, easier to just blame the average Taro for holding onto his money and causing all the ills in the economy.
As well as you it seems. Yet if China was "communist", pray tell why there are people there living in poverty while others have more money it seems, than some 3rd world countries?
China may think it's one thing, but the reality is different, same as Japan.
And Kishida wonders why the birth rate is going down. Keep increasing taxes and not helping low earners and the end result will be a year by year continual decrease in the population:.
We may sometimes complain about Japan, but there is no doubt the public, are way way more savvy, intelligent about their finances than say your debt ridden average western person . First, they prefer cash. definitely the best way spend and save. where as in the west, the banks and companies try to trick your mind into spending your cash by using other means.EG, Credit Cards, Cash Cards, Apps. Anything, so basically you never see "REAL CASH" leave your wallet. Credit is the wests way to trick you into thinking it is NOT DEBT. but it is. So call credit card...DEBT CARD. Your mind will thank you for it. The whole economy is built on debt. The Japanese consumer are fully aware that debt/credit is the road to poverty, stress, anxiety and unhappiness. Where as in the west it is seen to be a road to happiness. The new trick on the US and Europe now is Buy Now Pay Later. Who in their right mind would think that's a great idea for someone who can't save. Forget about all the gimmicks, points, and cute characters on apps, Stick with a Wallet/Purse, and cash. It will visually, tactilely and mentally, along with the few extra thinking minutes, seconds, subconsciously allow you to apply the financial brakes. These points may seem small, and pointless to those who can manage their finances or are pretty well off, but if you're unable to manage your money, it's a great way to start out.Because you physically handing over cash, and you can visually see your wallet empty. Maybe it is also a reason When Japanese buy their homes, they understand, it's not about flipping homes. They can SAVE money, because they don't need to keep buying, new things for their third or fourth new home, which is why the housing market is too important in the West and why young people can't afford a house by themselves now. We could before, but not now. Another great reason are the multigenerational homes. What a fantastic way to save wealth! Remember if you're spending all your money, and not saving, you're giving it ALL to SHAREHOLDERS who are keeping your money. Lets give the Japanese housewife and consumer, credit where credit is due. ( oh I like the last line) LOL
Could not move yesterday in Morioka because every man and his dog were out shopping. So opposite this story.
I have always never spent more than I had ever since I was young.
Reason being, we where born poor and knew the value of money.
I do use credit cards just only to pay off at the end of the month.
I was criticized in my early days for not over spending as I tried to save every month to build a nest egg.
I am where I am now and can spend freely but am always careful not to over do.
I do enjoy my life.
That ‘excess’ ¥64 trillion has further skewed an already egregious wealth imbalance. Clobbered by inflation and seeing their life chances circumscribed in all sorts of ways, there’s a growing anger and resentment among the burgeoning number of those with barely two sticks to rub together. As impoverishment grows, blowback will happen.
Wages in First World countries no longer keep up with productivity gains like they used to. What this means is that it is increasingly difficult for folks to save like previous generations. In Anglo countries in particular, there is also the now crushing cost of real estate.
So big picture for Japan, people cannot earn like they used to relative to the cost of living, and therefore should not be expected to save in the same way. While Japan is an aging society, the absolute number of old people has pretty much plateau-ed already, they are increasing in % of the total population but not so much in simple numbers. Most wealth in Japan is owned by old people, and as their time comes, there will be a hitherto unseen level of wealth transfer in Japanese society. That is, a larger number of people who on average are wealthier leaving inheritances. Rather than one poor parent leaving assets to four kids and eight grandkids there will be a wealther parent leaving assets to two children and one grandkid. This should be remembered when people make "Japan is finished" type predictions. A lot of wealth is going to be freed up in the coming 25 years or so.
JeffLee: "Can't think of a better time for the govt to hike the corporate tax and lower the consumption tax."
That would require ethics and common sense. But we're talking about the government here, so it'll likely end up in increased consumption tax and a request to "gaman and go out and spend!"
The statement Excessive Savings are like a mirage. It's like saying I have $100 in savings, but I will also have $200 owing on my credit card and the interest rates will be going up. I think most Japanese understand they need to keep savings in order to offset lower future income (pension/higher taxes etc) and higher costs of living. And those Excessive Savings are not held by all Japanese, but rather a minority.
They figured this out now? Inflation means that saving in JPY will be wiped out. I strong dollar means that savings in JPY will be wiped out. That is the price we are paying for the reckless polices the last few years, and that is the price we will be paying for the increased USD spending of military buildup.
Not spending if I can help it.
Don't wanna up the wages ?
Wanna up the inflation?
Can't have it both ways LDP!!!
Beware of being out of Australia too long or you can loose your pension there, We’re heading back soon if we don’t then we’ll be on the japanese peanut pension living under a bridge.
check out their web page.
Interesting quote from site statista.
You should have read more of the site.
If average two persons household savings are increasing, the details are :
"Savings held by multi-person households increased proportionally with the age of the household head. The average net savings, expressing the current savings minus current liabilities, of multi-person households amounted to more than 13 million Japanese yen in 2021. Among households with a household head aged below 40 years, the net savings were negative, indicating that liabilities exceeded the amount of savings held among households in younger age groups."
Japanese below 40 are poor !
Inheritance tax in Japan is a rip off.
Younger Japanese first hardly ever inherit before being retired, the get barely a return.
Hence the GDP per capita has remained the same as 25 years ago...
Japan is getting poor compare to all other G7 countries.
Boomers below the 70yo mark have another 20 odd years left. Thats a long time with a fixed income and rising inflation.
Some people have Legitimately accumulated a lot of cash at home, and are now stuck in the situation of not being able to bank it without being accused of some Financial Crime!
Banking cash is never a problem. I do it all the time, even from other countries.