Recovery? What recovery?

By Henry Hilton

It is the job of politicians in Japan and elsewhere to talk up the economy. They are obliged to insist that things are looking brighter on the scantiest of evidence both to offer reassurance and to save themselves from irate electorates.

If things go wrong and the global recession turns into a global depression, then they know only too well what their fate may be. Unless improvement is on the cards, lots of them could find be lining up in the very same Hello Work unemployment queues that their constituents are now in.

This spring, the momentum appears to be with the optimists and the pols -- to no one's surprise -- have been milking the hints of recovery with a rare energy.

Americans are being told by President Barack Obama that "we have begun to pick ourselves up and dust ourselves off and we've begun the work of remaking America." Likewise, stock markets around the world, taking their cue from Wall Street, have been putting in decent performances with some bank shares doing extraordinarily well after huge sell-offs over the winter.

If you believe what the markets are saying, then all those pep talks about being on the road to recovery will chime in nicely. Guff about green shoots and spring being the season of growth may work wonders with those who want to believe that the worst is over and we are once again set for growth in the months ahead.

Yet, consumer surveys and talk show chats do not a recovery make. With Chrysler going bankrupt, doubts about whether the Chinese economy can really be performing so admirably when energy consumption is reported to have dipped and the massive unemployment rates in countries such as Spain, it may pay to be skeptical. And if this wasn't enough, political leaders and their officials may soon be wrestling with a swine flu pandemic that would bring massive human suffering and economic disruptions.

Loads of wariness is surely in order in the wake of the Bank of Japan's recently released economic outlook survey. The BOJ, by its own admission, is owning up to having got its forecasts hopelessly wrong. Its new predictions are miles apart from previous ones where the estimates for economic performance where relatively benign.

Now it is a totally different story. The authors of the latest outlook report frankly that "economic conditions in Japan have deteriorated significantly." They warn pretty bluntly that there a host of downside financial and stimulative risks that leave the nation facing considerable pain in the months and years ahead.

Japan's future is likely to be conditioned by factors that neither its central bank nor its LDP-led coalition cabinet can easily correct. External forces, such as the fact that housing markets have yet to touch bottom in many of its major trading partners and the uncertainties over "toxic waste" within the financial sector overseas will have to be resolved before banks will confidently lend to each other and their clients. Only then will consumers perhaps stop saving and start thinking at least of going on a shopping spree once more.

Tokyo also faces an additional headache over the extraordinary strength of the yen. This is having a large impact on its hopes of exporting itself away from trouble and appears unlikely to be easily correctable short of central bank intervention and a gradual devaluation. The fact that the yen has strengthened from around to 200 yen to the pound to somewhere in the 130-140 range underlines Japan's problems. The yen is fast becoming a currency that everyone wants to hold with the inevitable result that potential importers abroad are going elsewhere when an alternative supplier can be found.

The result is bad news for the nation, its government and hard-pressed families. Japanese tourists may never have had it so good when they reach Hawaii, but Tokyo is now experiencing its first trade deficit in over a generation and growth is certain to be negative in this financial year at around 3%.

With deflation now a certainty and consumers increasingly frightened for their jobs, it is going to take more than a few spring shoots and noises from government leaders to propel Japan back to what used to be termed normality.

At the moment, all the Bank of Japan can aim for is to "exert its utmost efforts" to return Japan's economy to "a sustainable growth path with price stability." Admirable objectives, no doubt, but it won't happen tomorrow or next month or even next year at this rate. Be prepared for a hard slog ahead.

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how hard is slog

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how hard is slog

not so hard if you listen to Aso's slogan, nantonaku !

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Yep, its a great recovery; more people losing their jobs every day, companies going bankrupt every week. It is so obvious that no recovery is taking place yet the idiots still try to spruke up the market. Until the bottom is hit there is going to be no recovery, spruking is just prolonging the suffering of the people out of work as unrealist targets are set. People lose trust in the media to the point that some people are wondering if there is a swine flu pandemic or is it just governments trying to cause a diversion from economic inaction by government. The WHO are even changing set rules for a level 6 pandemic by keeping airports open because of the economic crisis so who do you believe? Is it a pandemic or a cover up to make more excuses for drops in the "recovering" economy.

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"A sustainable growth path with price stability"? Is Japan going to abolish capitalism and look for a new solution?

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When the bubble first burst around 1989 Japan's response was to restructure the hell out of it's businesses, early retirement packages, firings, lay offs, bankruptcy, and companies going out of business was the norm till about 2000. Then many of these companies hired on part timers, with low salaries and without any benefits to mention, as Japan really turned up the "export machine". Now what we are living through is the total collapse of that strategy. Japan's exports came at the expense of an expanding domestic market. And by doing so they hurt American industries to the point where many are on the verge of collapse. Japan has but one simple soltion... import and focus on the domestic market. Plain and simple folks. If you can pry just a fraction of the 4 million yen the average Japanese has in the bank out of their grubby paws... well, its "happy days are here again" !

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-it will be a good year to grow a garden or educate yourself.

Still don't feel confident about the stock market and I feel many banks are still on the teetering edge. China with all their growth will have more difficulty and resentment than most. A fight for control of natural resources may take place =people will use this recession to buy up control of these rights =many national currencies may fluctuate greatly for "them" to do this. Fear-mongering will only help their cause.

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What a joke. I went on a business trip on the 14th of September 2008, and by the time I returned one week later the media was spewing that it was the possible end of capitalism as we know it. Then, they proceeded to rob the Federal reserve of fiat currency in a panic and rushed to hand out corporate social welfare benefits in the middle of a significant U.S. regime change. Like no one saw it coming other than the occasional spew about the loan crisis? One day it is fine, one week later it was announced that it was the possible end of capitalism as we know it?

The fact is that there has been a problem for quite a long time. While many were too busy waving flags and swimming in a media spewed rhetoric of fighting for the notion of freedom, it was suddenly announced that the economic sky was falling resulting in the formulation of a perfect excuse for a lot of already suffering companies to claim poor performance and cut labor.

Why the perfect excuse for everyone to claim poor performance? Because if any poorly performing large corporate entity had tried to make any cuts before the official media announcement of recession, they would have surely suffered due to their share price tanking resulting in billions in loses and then there would have been hell to pay explaining why their entity is suffering and everyone else appears to be doing fine.

Ironically, this phenomenon also prevents many large entities in our markets honestly trying to adjust their operations to reflect true current market forces due to the fear of how their decisions will be reflected in the media and how that public information affects their share price in the world markets. Bubble burst? Never all at once…Been there, done that.

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