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Japan hits back at critics at Davos

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The BOJ have come under international criticism in the past for sitting on it's hands and doing too little. Now the Government gives them a kick in the pants it's suddenly heavy handed, currency manipulation etc etc ?!

Jeez.

2 ( +6 / -4 )

Speaking at the World Economic Forum in Davos, Akira Amari said the Bank of Japan had “voluntarily” decided with the government to introduce a new inflation target in a bid to boost the world’s third-largest economy.

Yeah right, it was as voluntary as my wife telling me to take out the garbage on trash day.

5 ( +8 / -3 )

The strong yen is hurting both Japanese exports and the return on foreign trade for Japanese companies. Underlying this is that he eurozone crisis and the devaluation of the dollar (U.S. printing money) has caused a flight of capital into Japan boosting the yen. Merkel should think carefully about her own country's naiveties in the 90's and their global economic impact before criticising others.

I agree with Tamarama above. The BOJ should be doing much more, not receiving criticism for doing nothing. After twenty years of sterility, I think it's time for the BOJ to start acting even if it means they are compelled to by Abe.

4 ( +6 / -2 )

Japan should invest in European bonds, that would have the dual effects of gaining European praise and lowering the value of the Yen.

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"BOJ decision was voluntary"....haha...and the joke of the week award goes to..

5 ( +7 / -2 )

It's always easy to criticize but difficult to offer solution, beside Japan has been in a deflationary spiral for the past decade or so. Isn't it time to go your own way?

4 ( +5 / -1 )

This like one smoke and mirror filled magic show where one con artist is complaining to another con artist that he's not doing his cons according to the rules.

2 ( +3 / -1 )

Japanese feel a sense of entitlement and don't want to go through any austerity measures to bring the economy back up on it's feet and get people here to start spending the literally trillions of yen they have stuffed away.

More public spending is not going to change this, and may make it worse as taxes are being raised and people get even colder feet and want to put more money away.

4 ( +7 / -3 )

It has been very, very entertaining to read conflicting messages of the LDP.

The message to the world audience and the message to domestic audience are all conflicting everyday. The LDP was not expecting criticisms from the world, and they are in damage control. The truth of matter for the world audience is that this agenda was in their poiitical platform from the beginning to win the election.

Don't they know everything what they say can be translated and transmitted to all over the world within a minute? I can read Nikkei, all Japanese newspapers, Bloomberg, FT, Economists, NYT, JT and others for decision making.

We are all connected more than ever. I think the LDP thinks we are stupid. They better get story streight for ALL.

However, IMF chief added that We certainly would like them to be complemented by a medium-term plan that includes how that debt will be reduced going forward.

The debt/gdp ratio of Japan is currently at 214%- the highest in the world.

This is my biggest concern for Japan as well. Japan will start printing yen When the unattainable inflation target is set at 2% (OPEN ENDED) while global financial products are very complecated and sophisticated today than ever, and it should not be MECHANICALLY controlled without economic reform. I hate to tell you but I am forseeing "The Black Swan" in Japan. You cannot predict The Black Swan, but it comes when you are not expecting at all.

What's the LDP is doing today will lead Japan to a "bubble economy' once again, and it will eventually bust Japan. This time it will be beyond repair. Japan needs is a solid foundamental economic reform.

3 ( +4 / -1 )

YubaruJan. 27, 2013 - 09:38AM JST

Japanese feel a sense of entitlement and don't want to go through any austerity measures to bring the economy back up on it's feet and get people here to start spending the literally trillions of yen they have stuffed away.

Exactly Yubaru.

Some of the posters who commented on here should do a bit of basic background reading. Try beginning here to get a grasp of the bigger picture. http://www.globalresearch.ca/japans-currency-war-militarization-and-monetary-policy/5320566

1 ( +5 / -4 )

Smoke and mirrors and contradictions. All these goons supporting Abenomics seem to forget that Japan's boom economy was built on the backs of overworked and under paid scab laborers and the recent labor law reforms (as fickle as they are) do not allow for the same kind of scab labor, plus the current generation will not give their lives to Japan-Inc. This inflation target will take many years to reach regardless of how much pressure Abe puts on BOJ. The upcoming increase in sales tax will make certain that his inflation target will not be reached because people will stop spending. Japan's main natural resource is its workforce, which is aging and declining. The only thing Abenomics will achieve is making the middle class the lower class and reduce disposable income into the minuses creating huge debts for the private sector and screwing all the banks in Japan. Good on ya Abe-San!

1 ( +5 / -4 )

You can argue over what the proper long term policy is, but can anyone argue that in the short term, the weaker yen won't help the Japanese economy? BOJ does need to be more proactive.

-2 ( +1 / -3 )

It's the trillions of Yen stuffed away that allows the Japanese to effectively own all of their debt.

But whilst the Japanese might be adverse to investing money, they sure aren't to spending it. One look at the shops over the New Year period - or after for that matter, shows you that.

The OECD averave for consumption tax is about %15 - Japan's tax will be 8% in 2014, 10% by 2015.

The IMF recommends that is too little and that it should be %15. It's something that simply has to happen.

2 ( +4 / -2 )

More public spending is not going to change this, and may make it worse as taxes are being raised and people get even colder feet and want to put more money away.

The decline in wage levels also contributed to deflation through a decline in the prices of goods and services which are labor intensive. While Japan was relatively low in unemployment compared to US and Europe as the wage level of Japan remained flexible (subcontract workers) and has been continue declining. When the labor force was losing purchasing power and the jobs are evaporating, the same labor force (consumers) stops spending.

0 ( +0 / -0 )

While Japan was relatively low in unemployment compared to US and Europe as the wage level of Japan remained flexible (subcontract workers) and has been continue declining.

This is a fallacy due to the reporting methods that Japan uses to determine who is employed or not compared to how Europe and the US report their unemployment figures. For reporting purposes, simple explanation here, anyone who works even one or two hours per week (iirc) are considered to be gainfully employed for reporting purposes and that makes it look like there are less Japanese unemployed.

But whilst the Japanese might be adverse to investing money, they sure aren't to spending it. One look at the shops over the New Year period - or after for that matter, shows you that.

You can't use the main shopping season of the year to justify your comments here. You have to dig deeper. Sure traditionally speaking they spend more during the end of the year and over New Year's, but that doesnt mean that they are spending more in fact it's less that before overall. The bonuses that many get and traditional new year gifts (oseibou) give a small bump in sales but it's still nothing in comparison to the past.

It's the trillions of Yen stuffed away that allows the Japanese to effectively own all of their debt.

Sure the Japanese own most of their debt, BUT the money is going to have less value, and the people are going to have to eventually dip into those savings to pay TAXES and that is counter-productive and will do little at all to assist an economic upturn that is sustainable.

Traditionally speaking Japanese consumers will horde if they think things are going downward and will not spend money, which is directly opposite of what is actually needed here and not having the government increase public spending, by increasing demand would do more for the economy than saving. But the consumers dont trust the government hence the lack of spending.

-1 ( +2 / -3 )

This is a fallacy due to the reporting methods that Japan uses to determine who is employed or not compared to how Europe and the US report their unemployment figures. For reporting purposes, simple explanation here, anyone who works even one or two hours per week (iirc) are considered to be gainfully employed for reporting purposes and that makes it look like there are less Japanese unemployed.

Yubaru, do you know what is a true unemployment including underemployment figure in Japan today? I am just curious. According to the data it is now at 5.6%.

0 ( +0 / -0 )

@dog

Some of the posters who commented on here should do a bit of basic background reading. Try beginning here to get a grasp of the bigger picture. http://www.globalresearch.ca/japans-currency-war-militarization-and-monetary-policy/5320566

LOL! If this is your idea of "basic background reading", you have the same way of thinking as these Canadian neo-marxists who, like any fundamentalist group, try to reduce the world to a black-and-white scenario, with, of course, themselves as the indisputable (knights on) white (horses). To quote from the "article":

Today, the right-wing Abe government is pursuing a similarly perilous mixture of nationalist economic policies and militarism, and it is not alone.

Not alone indeed, but strangely enough, it seems Japan's partner in this "perilous" course is the U.S. No mention of China (who has without a doubt, been on this very course for many years). Unless, you want to deny China's longstanding currency manipulation and record spending on building up its military capabilities.

2 ( +3 / -1 )

With Japan unemployment rates you have add to them like Yubaru says.

If its around 5% the reality is likely around 8+%, the numbers really are inaccurate, intentionally I might add.

Politicians here constantly LIE to their own & most sadly buy into it

-1 ( +3 / -4 )

http://www.tradingeconomics.com/japan/unemployment-rate

I am looking for more information that may be more current, one thing in the link that people have to keep in mind is;

In Japan, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

Ok what about the people who are not employed and not looking for work? Or the one's that are underemployed and are being reported as employed?

-1 ( +2 / -3 )

@ Globalwatcher

I've got to agree with Yubaru. Not only are the Japanese unemployment figures skewed by the way the government collects them, but my people who are classified as employed are underemployed, from the security guard in the street, waving people along with his plastic baton, to the 15 workers digging a hole in that street.

By any normal estimate actual unemployment in Japan must be about 10% and 10% of the workers are doing jobs which should be actually done by only 5 % of workforce.

As I'm sure you'll agree under-employment is as much a scourge as unemployment itself in a developed economy because the wages that the underemployed collect are subsistence salaries.

Yubaru was also right in that the Japanese are not prepared to go through the economic pains and feel they are entitled to export their economic problems to the rest of a world that they have very little connect to.

I'm rather saddened by the US reaction so far and I want the US to put their foot down and stop this economic stpidity; the sooner the better.

Japan's real domestic economic woes lie in wage deflation, rather than price deflation. As a matter of fact Japan could do with a much bigger jolt of price deflation in the essentials such as rented property and the day to day essentials.

As we both agree, the only way to resolve the issue of wage deflation is either legislate annual wage rises or increase productivity, or do both. As we also agree the only way to increase productivity in Japan is deregulate and restructure the economy, and stop trying to compete for the same maunfacturing jobs as their Chinese/Vietnamese counterparts.

0 ( +4 / -4 )

You can't use the main shopping season of the year to justify your comments here. You have to dig deeper. Sure traditionally speaking they spend more during the end of the year and over New Year's, but that doesnt mean that they are spending more in fact it's less that before overall

What is 'before'? When are you referring to?

I'm sorry, but the reality is that the Japanese are prosperous people and they consume like mad. It might be less that before, but you need to qualify when you are talking about and consider other things in the equation ,like; the declining population, the Asian financial crisis, the Global Financial Crisis, the impact of recession on household spending confidence and the tsunami. But in spite of these things, the Japanese still spend mightily in relative terms. A quick check of any statistics will show you that.

BUT the money is going to have less value, and the people are going to have to eventually dip into those savings to pay TAXES

Well, first you complain that the Japanese, through some sense of entitlement, resist the austerity measures that are designed to tap into the savings you mentioned them having, but now you criticise a measure designed to do exactly that?! I'm confused.

The reality is, the Japanese taxation system is criticised for being too cumbersome and too inefficient. And, they must to pay more.

In real terms, your 3000 yen Uniqlo down jacket will cost an extra 150 yen. Do you really think that will stop spending?

-1 ( +2 / -3 )

Japanese wages and rents are so expensive. It is making business uncompettitive. Loss making business will be reluctant ant to hire anyway unless output cost can be lowered. If the labor and land and accomodation cost can be reduced, Japanese export will be competitive too. Instead of printing more Yen for becoming competitive for short term,some structure changes are more sustainable.

-1 ( +2 / -3 )

Well, first you complain that the Japanese, through some sense of entitlement, resist the austerity measures that are designed to tap into the savings you mentioned them having, but now you criticise a measure designed to do exactly that?!

Complain, no it's an accurate observation from nearly 3 decades of living here. There are no austerity measures on the table only an increase in public spending combined with raising taxes,

I said they WOULD resist austerity measures that are needed to bring the economy back. I did not say there are any,

You don't want to have people using their money to pay for increased taxes, which are counter productive to sustained economic growth.

-1 ( +1 / -2 )

Thanks to Yubaru, GW, Dog. I have read the data. It is not very impressive and it is very high when considering under employed and people who gave up looking for work.

1) What Japan needs to do is to bring back manufacturing jobs from overseas while the corporate tax rate has been reduced. The government needs to start giving more tax incentives to corporations for hiring workers back.

2) introduce another tax incentives for modernization of technology and higher skill training expenses for productivity and efficiency.

3)Abolish mandatory retirement and set minimum wage for wage stagnation.

4)Evaluate old labor laws to fit for global environment and ENFORCE the law. At this time, nobody is ENFORCING the law.

Japan's real domestic economic woes lie in wage deflation, rather than price deflation

Well, with current economic model, the wage deflation will continue. With OPEN END 2% unattainable inflation target Abenomics (too much money supply) will create a bubble in real eastate, equity, bond markets that have already been suturated while your savings will be depreciate to worthless paper.I just do not understand many Abe supporters do not understand this consequences.

I'm rather saddened by the US reaction so far and I want the US to put their foot down and stop this economic stpidity; the sooner the better.And hopefully, our unemployment will go down to 6.5% level as we planned.

We did not have a choice unlike Japan. We were ready to go off the cliff within 24 hrs. People still do not know this. Remember, the US is the largest economy in the world. Ben Bernanke (Helicopter Ben) is doing a great job, but soon he will be retiring and we are speculating Timothy Geithner will take over. He is fiscally more conservative, so things will change. US is slowly getting out from the pit.

0 ( +0 / -0 )

@Tamarama

Again, I wouldn't mind as long as the sales tax it is lower/0 for food and reduced for books.

0 ( +0 / -0 )

Again, I wouldn't mind as long as the sales tax it is lower/0 for food and reduced for books.

I can understand food but how are books a necessity?

-1 ( +0 / -1 )

To people who support "austerity": in Italy is killing us. We have consumption tax at 21% 21%!!!!! You know. Thanks to "austerity". Austerity forced on us basically by Germany. Germany is destroying the ecomonies of South Europe. They still think thay are superior to us, but they have an export-oriented economy, exactly like Japan. if their economy has always been good in past, it's thanks to Euro. Countries like Spain, Italy, etc., bought German stuff because it wasn't expensive to us, since we have the same currency. But if Germany had a stronger currency than us, their economy wouldn't be that good. Now they are doing good business with China, but in the past their main market was Europe, including South Europe. I'm happy if now Japan is depreciating its corrency. German stuff will be less competitive and their export-oriented economy will start to suffer. So, they will stop to feel superior to the other Europeans, forcing people in South Europe in a condition of poverty. USA, UK, Japan can do whatever they want. In Europe, we must do whatever Germany wants.

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don't you just love it when some goes against the international central bankster system.

0 ( +0 / -0 )

Also, I'd like to add that the crisis in Italy was caused mainly by International speculation. In Italy, families have less debts than in UK or US. Our debt/gdp is around 127% or something like that, high but far from the one of Japan. Before rating agencies started their speculation on us, our economy wasn't very good, but decent at least, even if the international economy is a mess since Lehman Brothers. We weren't almost touched by what happened in USA. at that time, because Italian families haven't high levels of debts, like in USA or UK. BUT USA and UK have triple AAA. Such a joke. Suddenly international market attacked us. You can't understand how much of money we are paying in tax now. We were fine enough before international market attacked us. It's absurd. Just because of the international speculation. Sorry for my bad English. I'm very upset.

0 ( +0 / -0 )

don't you just love it when some goes against the international central bankster system.

We do not have an international central banking system. If you are thinking of IMF, the role of IMF is totally different.

0 ( +0 / -0 )

http://www.youtube.com/watch?v=51-Jfh6ADH0 Iceland at Davos.

If Japan cannot do what Iceland did, then the next best thing is for the citizens to get off the fiat and go physical gold/silver 100% backed currency. The Japanese Gov shouldn't continually rip off their populace thru inflation efforts.

0 ( +0 / -0 )

Alex80Jan. 27, 2013 - 10:11PM JST

You have summed it up everything what we have been talking about. By using Euro, instead of Mark, Germany has been taking an advantage of the gap (Euro vs Mark) to stimulate economy. Germany is now a creditor that is in charge of EU, and Italy, Spain, Greece became debtors. That's why it is very important to leave BOJ independent.

What you have described here is a critical element of Germany and Japan to succeed in global economy. INNOVATION, INVENTION.

Devaluation of currency is very ineffective in global economy as there are always other competitors like China, Vietnam, and many others with cheap labor.

The most important thing is to change old economic model to domestic spending model focusing on goods and services what their own people need first with innovation aiming at declining population and growing seniors.

In Japan, with demographic change in aging society and population regressive growth, you have a clear opportunity to do so. If I were a policy maker in Japan, I would aggresively invest in medical industry to satisfy a need of seniors while implementing a new technology to offset declining population growth.

After what I have seen in Fukushima , I may think of investing in alternative energy mix. Japan has a tons of energy resources around you, It takes a good leadership to do so.

I may even come up with a huge tax plan encouraging all corporations to move out from big cities like Tokyo, Osaka, Yokohama, Kobe. There is no need to keep business in these cities any more as you can maximize digital technology to do the same.

I have more plans I want to list, but I do not want to bore you.

0 ( +0 / -0 )

YubaruJan. 27, 2013 - 02:20PM JST

Well, first you complain that the Japanese, through some sense of entitlement, resist the austerity measures that are designed to tap into the savings you mentioned them having, but now you criticise a measure designed to do exactly that?!

Complain, no it's an accurate observation from nearly 3 decades of living here. There are no austerity measures on the table only an increase in public spending combined with raising taxes,

No austerity. I belive in "What's been given should not be taken away" in legal ideology unlike Aso Taro's "hurry up and die".

Austerity is going to hurt a job growth. What Japan needs to do is a streamlining medical infrastructures and cost cutting measures instead of taking benefits away from the people. Iy takes a good leadership to do so.

0 ( +0 / -0 )

Yen is just like any other commodity. More in circulation = less value. The buyer (USD $ seller), perceiving a weaker yen due to more in circulation will demand more yen in exchange for his dollar to Maintain The Same Purchasing Power of real products/services as before. Thus in order for the yen to be bought, the yen seller have to cough out more. Whereas it was say USD$1 = 75 yen, now it is USD$1= 90 yen to complete the transaction. Repeat this for the Korean Won, Euro and all freely convertible currencies and you see this affects the competitive export advantage of their countries. This sounds like a roundabout way of Currency Manipulation, not direct like China open market intervention so it is hard to detect. Japan had tried direct open market intervention like China did but failed, so now this Quantitative Easing thing is the way to go! To be fair to Japan, US , the mother of all QE style currency manipulation, did it first and China of course do it through direct open market manipulation. Everybody is complicit!

-3 ( +0 / -3 )

now this Quantitative Easing thing is the way to go

I believe your thinking is in International Trade while I am talking about International macroeconomics.

Based on your exporting driven economic model competing against China, Vietnam, Philippines with cheap labor and BOJ printing more money will motivate these countries to devaluate their currencies as well. It will never work.

Who will suffer at the end? It will be the middle income families of Japan. You will never win. At the end, Japan will bust like Iceland receiving financial help from IMF . Keep it mind the debt/gdp ratio of Japan is at 214% alarming point already-the largest in the world. If Abenomics failed, the LDP is stealing all opportunity, optimism, dream and future from young people of JAPAN as they cannot pay the debt back.

0 ( +0 / -0 )

@globalwatcher

I believe your thinking is in International Trade while I am talking about International macroeconomics.

I have zero economic background. All I know is economics is a subject when two Nobel Prize winners can take opposite viewpoints. We have Paul Krugman a Nobel Prize Winner vs a former Morgan Stanley Chairman in Asia, Stephen Roach who take a completely opposite view about China's currency manipulation. This is just one example. My point is with this kind of opposing viewpoints, I think a casual observer like me putting in my two cents in simple English may help clarify ' is this really a currency manipulation or not'? As I said, this is 'backdoor currency manipulation' because the outcome affects competitiveness of other countries eg S Korea.

I think long and hard and it just come down to Holistic way of looking at things. We know everything is woven together now between countries. There is NO WAY one action by country A cannot affect country B. For illustration a pain at one place, country A for eg, cannot be isolated because the person (world) is integrated and thus the pain will eventually spread to another location (country B) So it is because of this interconnectedness, it impossible for country B not to feel the actions of country A. Meaning if country B (eg S Korea) feel her export is undermined due to a Relatively Stronger Won, S Korea may take a Beggar Thy Neighbor policy, and yes, in simple English it is called a Currency War!

What was a slow burn in currency exchange pattern change under normal trading without bank interventions become a Drastic change in the exchange rates between countries since Abenomics is introduced. It is for this reason Abenomics is very dangerous as it will cause a reaction from S Korea and others. If I am Abe I would go slow to prevent this domino effect meltdown from happening.

And the winner is ? Nobody! Japan will only win somewhat if she go slow, forestalling a reaction by other Central Banks, but not at the current rate of BOJ printing.

If Abenomics failed, the LDP is stealing all opportunity, optimism, dream and future from young people of JAPAN as they cannot pay the debt back.

If Abenomics fail, I would suggest all Japanese creditors to ask for roads, bridges, stadiums and other construction projects undertaken by LDP to be named after them, take over ownership in exchange for debt forgiveness! After all this is mostly debts to Japanese themselves, so it is nothing more than a transfer/redistrubution of wealth from one segment of the Japanese population to another. This is not a far fetched idea as you may know in the US we have State stadiums being renamed to big corporations so it help to generate revenue for the State. This can be further extended by selling off the stadium to the creditors so the State will be debt free, or at least less burden to the tax payers. The new owners of the bridges, roads, stadiums be it ordinary citizens or corporations will then generate revenue by being toll collectors and stadium managers for events. Problem solved!

-2 ( +1 / -3 )

the problem is the bureaucrats. the ministry of finance wanted to raise sales taxes. the LDP got voted out of power because they tried to raise sales taxes. they got voted back in by agreeing to let Noda, a stooge of ministry of finance, raise the sales taxes that they wanted in the first place.

the politicians change but the bureaucrats policies keeping them in power go on and on. the only way anything will change in japan is if there is a crisis which allows the politicians to break the bureaucrats' power. hashimoto/ishihara understand that. abenomics just may do that. although it will not be pleasant...

0 ( +0 / -0 )

Mark Carney, governor of the Bank of Canada, hit back at this interpretation, saying that the group of seven leading industrialised countries had agreed not to intervene to affect the level of their currencies.!?

oh then maybe Japan should have disguised it as "quantitive easing" like the Americans do. im no fan of currency manipulaton but when your currency doesnt reflect the state of your economy then any country has a right to correct it. It isnt illegal, if it were then the US/China would be the most guilty period

-2 ( +0 / -2 )

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