An end to the Japanese lesson or Still ?

Astroboy · 6 Feb 2010

Dogen Z said:
While you're making fun of other people's debt and taking Japanese debt lightly, please remember that if Japan did not have such a crushing debt, it couild have built a trans national maglev rail system, built it own stealth fighters, and added 2 more Rainbow Bridges in Tokyo Bay. (Just kidding on that last part.) But seriously, Japan can't lower corporate tax rate, which is one of highest in the world, making it difficult for companies to compete globally. We will also have to pay at least double the current consumption tax soon because Japan can't wait until inflation kicks in to pay down the debt.

Well.... I thought the rest of world make fun of Japan's government debt (saying .... 200% of GDP !) until recently.... or maybe still, including Anglo-American rating firms as well as "quality" newspaper of those countries.

However, reality looks quite different. market price of sovereign bonds of PIGS (Southern European countries) has begun to decline, meaning yield is soaring, while their accumulated debt is less than 100% of their GDP, meaning less than half of Japan.

So I am making fun of Anglo-American rating firms, "quality" newspapers, and novel-prized economists as well as financial pundits of Wesstern economies, Not making fun of debts of PIGS.

Astroboy · 7 Feb 2010

G-7 Pledges to Keep Stimulus Even Amid Budget Stress
Group of Seven finance ministers pledged to maintain the flow of stimulus into their economies even as investors focus on mounting budget deficits.
Bloomberg - Are you a robot?

From Japanese lesson, their decision is right. In other words, it is too early to seek exit policy as private sector is now rushing to repay their mortgage or deleverage.

Government expenditure (expenditure by public sector) is only a hope to maintain the economy after bubble burst. It is key element from Japanese lesson.

Debt crisis ? Never mind. Japan has never entered debt crisis as government is spending money only on behalf of private sector.

The reason why financial pundits are making fuss about Debt Crisis is ..... They want "Inflation" as financial business model is based on Inflation economy. In other words, financial companies cannot earn money in deflationary economy. Debt Crisis NEVER happen in deflationary economy as bankers cannot find good customers for lending money, rather than government bonds.

Obvious from Japanese lesson.

Tokugawa Ieyasu · 8 Feb 2010

Astroboy said:
I wonder why JPY continues to soar against USD/Euro while everybody says that Japan is 200% GDP Debt-Laden country and theoretically being in the already-collapsed.

While Japan owes a lot of money to itself, its external balance sheet is extremely strong, it's the world's largest creditor nation.

Hence it's one of the two "safe haven" currencies, along with the issuer of the reserve currency.

Astroboy said:
Plus, why US/EU countries continue to follow Japan's path - those governments tend to seek exit policy when they see a little sign of recovery and plunge again - the same as Japan's mistakes.

Because unlike dismal scientists, politicians have to win elections.

Astroboy said:
Well.... I thought the rest of world make fun of Japan's government debt (saying .... 200% of GDP !) until recently.... or maybe still, including Anglo-American rating firms as well as "quality" newspaper of those countries.
However, reality looks quite different. market price of sovereign bonds of PIGS (Southern European countries) has begun to decline, meaning yield is soaring, while their accumulated debt is less than 100% of their GDP, meaning less than half of Japan.
So I am making fun of Anglo-American rating firms, "quality" newspapers, and novel-prized economists as well as financial pundits of Wesstern economies, Not making fun of debts of PIGS.

keep in mind these are the same firms that rated toxic waste CDO/MBS triple A.

remember Enron? these folks also gave them their blessing.

Astroboy · 11 Feb 2010

JGB update: Is Japan the next Greece?
http://ftalphaville.ft.com/blog/2010/02/09/142521/jgb-update-is-japan-the-next-greece/

And anwer is "Of course NOT".

First, gross debt levels are misleading. Japan's debt, after netting off the state's own holdings, is less than 100 per cent of GDP. Second, the cost of servicing its debt is low, at roughly 1.3 per cent of GDP. That compares with 1.8 per cent in the US, 2.3 per cent in the UK and 5.3 per cent in Italy. Third, Japan has fiscal wiggle room: sales tax is just 5 per cent. Fourth, 95 per cent of Japan's debt is domestically owned. Fickle foreigners have almost no sway.
Banks are awash with deposits that they need to place somewhere. For some time yet, the government will not find it hard to secure buyers for JGBs. Japan's debt problem will be worked out in the family.

I think .... Gwen Robinson of FT must have read my posts in Japan Forum.

Astroboy · 12 Feb 2010

China has ordered banks to increase their reserves for a second time this year, as lending is curbed in a bid to stop the country's economy overheating.
BBC News - China banks ordered to increase reserves again

Because of the Japanese lesson, China has decided to cool down property bubble in the country, but it will result in cooling down economic stimulus plan as well.

After all, world economy will not be able to grow unless somebody makes bubble somewhere in the world.

Astroboy · 18 Feb 2010

US bank lending falls at fastest rate in history
Bank lending in the US has contracted so far this year at the fastest rate in recorded history, raising concerns that the Federal Reserve may have jumped the gun by withdrawing emergency stimulus.
US bank lending falls at fastest rate in history

Even though banks want to lend money at cheap cost for private sector (needless toi say, limited to financially sound firms), private sector says "No thank you". This means US private sector is rushing to deleverage.

I recommend US government to spend money on behalf of private sector. Not to stop stimulus package.
Otherwise US economy will surely enter into great depression.

Government debts ? Never Mind.

Tokugawa Ieyasu · 20 Feb 2010

Astroboy, what's your view on the privatization of Japan Post?

Astroboy · 20 Feb 2010

Tokugawa Ieyasu said:
Astroboy, what's your view on the privatization of Japan Post?

As you may know, Key element of Japan Post's privatization is .... its financial function of Japan Post.

Privatization of Japan Post has long been requested by US government as it was pushed by Wall Street. US government and its financial advisors wanted to change the structure of Japan's economy - being full of cash saving.

They believed ... if Japan Post goes privatized, Japan Post will need to become more profitable .... meaning seek more yield instead of low-yield JGB ... and meaning more opportunity for Goldman Sachs, Lehman Bros, etc.

However, at the end of the day, such an aim failed... not because of change of power to DPJ, but because of self-collapse of Wall Street.

Plus, even though Japan Post complete privatization, it would have not been really going the way that the Wall Street planned as Japanese financial companies, including new Japan Post, will avoid financial risks, .... meaning their asset management will focus on domestic even at very low yield ..... meaning purchasing more JGB. It is obvious from Japan's own lesson of bubble economy.

Astroboy · 21 Feb 2010

In UK, Households tighten their belts as the time people spend paying off their debts drops by more than a month.
Households tighten belts as they pay off debts earlier

From Japanese lesson.

When economy was brisk, private sector, including households, spend money by borrowing from credit cards, banks, etc. During such time, public sector did not need to spend money. So usually government debt was smaller. But when economy goes recession, public sector needs to spend money as private sector usually do not spend money or deleverage. Very simple logic.

UK government needs to spend money. It is too early to think of exit policy.

Astroboy · 22 Feb 2010

US inflation at 0.2 per cent in January

Washington - Consumer prices in the United States climbed 0.2 per cent in January, the US Labour Department said Friday, in a sign that inflation has yet to pick up as the world's largest economy recovers from a deep recession. Core prices, which exclude more volatile food and energy costs, actually declined 0.1 per cent in January compared to the previous month. Inflation stood at 2.6 per cent in the last 12 months. Core inflation climbed 1.6 per cent over the year.

So-called deflation, isn't it?

I think .... US economy is entering a deflationary economy, following Japan's path, and it will be enhanced as FRB rise the base-rate. I suggest FRB to reconsider the exit policy.

Astroboy · 23 Feb 2010

Assessing the risk that Greece's woes herald something far worse
Domino theory

...... is wasta of time, I believe, from Japanese lessons.

Paul Krugman, a prominent New York Times columnist. In his view, those who fear a sudden rise in sovereign risk, particularly for America, misunderstand the reasons for the build-up of sovereign debt and underestimate the role of Treasuries as a safe haven. Sovereign-bond yields are low because private demand for capital is weak. And it is likely to stay that way as Anglo-Saxon households rebuild their savings and firms hold back from investing.

Paul Krugman is worth to deserve Nobel-prised as he undersrands the Japanese lesson.

All advanced economies cannot grow anymore unless somebody makes property bubble somewhere in the world. Thus, yields of all sovereign debts are declinig, while "The Economist" is making fuss about it.

Astroboy · 23 Feb 2010

Commerzbank posts 2009 loss of 4.5 billion euros

Partially state-owned Commerzbank posted a quarterly net loss of 1.86 billion euros (2.53 billion dollars) and an annual loss of 4.54 billion euros.
The quarterly loss, which the bank said was the result of its devaluation of risky assets, was much larger than an average analyst forecast loss of 1.17 billion euros compiled by Dow Jones Newswires.
http://www.newsmeat.com/news/meat.p...&channelId=2951&buyerId=newsmeatcom&buid=3281

Unlike US banks, European banks refused stress test last year. From the Japanese lesson, risk asset devaluation in European financial institutions is likely to start from later last year, and will continue longer than we expect, and will result in deflationary economy as well as prolonged recession.

Exactly following Japan's path.

Astroboy · 25 Feb 2010

We may have to start calling the Fed chairman Bernanke-san, after all.
http://krugman.blogs.nytimes.com/2010/02/19/disinflation/?scp=2&sq=Bernanke-san&st=cse

Novel-prised economist Paul Krugman begin to say .... "Bernanke-san", as US economy is entering deflation.

I think Krugman tells FRB is following Japan-path exactly. That's why he says "Bernanke-san".

Tokugawa Ieyasu · 1 Mar 2010

It's really remarkable to see the back and forth political football between Kan and BOJ on combating deflation. I don't really understand BOJ's reluctance to monetize debt though-with a rock solid yen (too strong for exporters), low JGB yield no inflation, what exactly is Shirakawa worrying about?

Tokugawa Ieyasu · 1 Mar 2010

Astroboy said:
As you may know, Key element of Japan Post's privatization is .... its financial function of Japan Post.
Privatization of Japan Post has long been requested by US government as it was pushed by Wall Street. US government and its financial advisors wanted to change the structure of Japan's economy - being full of cash saving.
They believed ... if Japan Post goes privatized, Japan Post will need to become more profitable .... meaning seek more yield instead of low-yield JGB ... and meaning more opportunity for Goldman Sachs, Lehman Bros, etc.
However, at the end of the day, such an aim failed... not because of change of power to DPJ, but because of self-collapse of Wall Street.
Plus, even though Japan Post complete privatization, it would have not been really going the way that the Wall Street planned as Japanese financial companies, including new Japan Post, will avoid financial risks, .... meaning their asset management will focus on domestic even at very low yield ..... meaning purchasing more JGB. It is obvious from Japan's own lesson of bubble economy.

Kudos to DPJ for bringing Japan Post's privatization to a halt. Japan Post is not about maximizing profits (so wall street could have a bigger bonus), it's a social institution serving the financial needs of rural Japan.

And Kamei is quite a character, seizing every chance to bash Koizumi and his neo-liberal inspired reforms

Tokugawa Ieyasu · 2 Mar 2010

Unemployment rate declined to 4.9%, household spending up, 10-year JGB auction went well.

That's in addition to surging exports and increase in retail sales.

Astroboy · 3 Mar 2010

Tokugawa Ieyasu said:
Unemployment rate declined to 4.9%, household spending up, 10-year JGB auction went well.

That's in addition to surging exports and increase in retail sales.

However, European countries may not be doing well.

Bank of England Plans to Sell 3-Year Bonds in Dollars
Bloomberg - Are you a robot?

Maybe, UK government bonds in Stg Pound do not sell well. But government bonds in foreign currencies (e.g. USD) will be much riskier to the UK government because Bank of England is not allowed to print USD currency.... UK will face more risk of default, like Argentine, South Korea, Thailand and Russia.

Astroboy · 7 Mar 2010

Iceland rejects plan to repay Icesave debts
BBC News - Iceland rejects plan to repay Icesave debts

I think ... decision of Icelandic people is quite normal because the problem of Icesave is a matter between Icesave (private financial company) and Britons/Dutch depositors (private). There is no obligation for Icelandic people to compensate the loss of the private bank.

From my pespective, this is the reason why Japanese tend to save money at domestic financial companies and hesitate to deal with foreign financials. If something wrong happens, foreign countries will do the same as Icesave. After all, yields of JGB and domestic banks are always low.

Tokugawa Ieyasu · 8 Apr 2010

Astroboy said:
As you may know, Key element of Japan Post's privatization is .... its financial function of Japan Post.
Privatization of Japan Post has long been requested by US government as it was pushed by Wall Street. US government and its financial advisors wanted to change the structure of Japan's economy - being full of cash saving.
They believed ... if Japan Post goes privatized, Japan Post will need to become more profitable .... meaning seek more yield instead of low-yield JGB ... and meaning more opportunity for Goldman Sachs, Lehman Bros, etc.
However, at the end of the day, such an aim failed... not because of change of power to DPJ, but because of self-collapse of Wall Street.
Plus, even though Japan Post complete privatization, it would have not been really going the way that the Wall Street planned as Japanese financial companies, including new Japan Post, will avoid financial risks, .... meaning their asset management will focus on domestic even at very low yield ..... meaning purchasing more JGB. It is obvious from Japan's own lesson of bubble economy.

As expected, Washington is screaming bloody murder over the overhaul of Japan Post

Bloomberg - Are you a robot?

Astroboy · 9 Apr 2010

Tokugawa Ieyasu said:
As expected, Washington is screaming bloody murder over the overhaul of Japan Post

Cannot be helped as bashing-others (against less militaristic-strength countries only) is the national habit of the United States of America. Plus, they know that Japanese have a full of cash in the banks. Probably financial bundits of Wallstreet are now setting their targets against Japan. So, we must keep low profile until the storm pass through us.

Tokugawa Ieyasu · 9 Apr 2010

Astroboy said:
Probably financial bundits of Wallstreet are now setting their targets against Japan. So, we must keep low profile until the strom pass through us.

the proper term for that is "financial engineer".

caster51 · 9 Apr 2010

In case of Japan

Under the current conditions of the Japanese economy where deflation continues since the country cannot break out of the recession, if that five trillion yen had been used for the expansion of domestic demand, business tax reductions, and other similar needs, it may have lead the economy towards prosperity through a rapid increase in competitive power.
The decision made by the Hatoyama cabinet concerning the use of those funds is clearly aimed at equality rather than competition. The problem is perhaps that like America, Japan has become a country that has reached its competitive peak due to easing regulations. Or more specifically, Japan, a country among developed nations with its middle class being the largest and universal health care, may be heading too far towards equality and probably needs to become a bit more competitive. In the next election, I would like to see debate occur concerning the direction that Japan must head towards.
At any rate, I would like to continue to report the outcome of the unfolding drama starring the developed nations entering the 21 century together with the advancing and underdeveloped nations striving to achieve the same success of those developed nations.

US

Lead mainly by capitalism, America is a society composed of both "winners" and "losers" with freedom and competition serving as its foundation.
Until today, there was absolutely no reason for the "winners" to help the 32 million uninsured "losers" in such a country that defines capitalism. The $940 billion health care reform cost will be covered by tax increases for individuals who receive yearly incomes of $200,000 or more and on investment returns such as dividends and capital gains. In order words, the "winners" are now 100% responsible for taking care of the "losers".
During the 20th century, developed nations with a focus on America were wealthy and experienced rapid economic growth to the max through competition they were prepared to go to war for. Then, the economic growth stopped in these developing nations where it seemed like a family of five would eventually have a car for each person. What is necessary for societies that have experience rapid growth but have stopped growing? Do they need further competition or is the spirit of competition opposed to the distribution of human wealth? Although the American public chose these changes adopted by President Obama, both President Obama and the American public probably care themselves about these changes for equality, something which is not born as a result of competition.
Since the flow of history is now changing, we must about the factors that change the flow of the markets. As expected, the flow of the stock, bond, foreign exchange, and commodity markets will also change.
This is because important things are changing for mankind.

what US is going ...

Astroboy · 9 Apr 2010

CMA released their "Global Sovereign Credit Risk Report" for Q1/2010 (link below) earlier this week.
The World's Safest and Riskiest Sovereign Debt Offerings Are..

The two tables that I found the most interesting were "World's Riskiest Sovereign Debt" and "World's Safest Sovereign Debt".

According to the report, Venezuela currently holds the dubious distinction of being the world's riskiest sovereign debt investment. Venezuela, according to the report, has a 48.5% cumulative probability of default over the next five years.

Argentina, Pakistan, Ukraine and Iraq round out the top five. The cost to insure against default for all five of these sovereign debt offerings is staggeringly high.

Dubai and Greece, which have both seen their share of troubles over the past year or so, are #6 and #9 on the list, respectively.

Lithuania, Lebanon and Romania fell out of the top 10 list in Q1/10, while Pakistan, Egypt and Iraq made their way in.

Meanwhile, Scandinavian countries dominate the list of the top 10 safest sovereign debt offerings.
Norway sits in the #1 spot, thanks to a miniscule 1.6% 5 Year CPD (Cumulative Probability of Default).
The next five countries on the list are: Finland (2.1% CPD), Germany (2.8% CPD), Sweden (3.0% CPD), Denmark (3.0% CPD) and Denmark (3.0% CPD).

I cannot see "Japan" in the list the Safest Risk countries. It is fine....
But despite CMA report, the 10-years sovereign bond yield of Japan is 1.385% as of today, the lowest in the world. I think CMA must stand for CoMediAn or similars.

Tokugawa Ieyasu · 9 Apr 2010

Astroboy said:
I cannot see "Japan" in the list the Safest Risk countries. It is fine....
But despite CMA report, the 10-years sovereign bond yield of Japan is 1.385% as of today, the lowest in the world. I think CMA must stand for CoMediAn or similars.

Japan is still the world's largest creditor nation, and that's not going to change anytime soon. Hence JGB has a well deserved status as one of the safest investments in the world, regardless of the doom and gloom from rating agencies and charlatan economists.

Astroboy · 10 Apr 2010

Tokugawa Ieyasu said:
Japan is still the world's largest creditor nation, and that's not going to change anytime soon. Hence JGB has a well deserved status as one of the safest investments in the world, regardless of the doom and gloom from rating agencies and charlatan economists.

I would like to ask you "When Euro collapse?"

Greece is not a big economy in the EU countries, but financial collapse of Greece will trigger the collapse of PIIGS economies. Then Germany and France will need to help their fianancial burden by extending financial supports.... Meaning German/French/Dutch/Others citizens will need to undertake financial supports.
Bloomberg - Are you a robot?

Europeans may be able to help each other as they are ethically Superior Race than Japanese (Whale-eaters/Bluefin tuna-eaters/WWII atrocious race/inhuma race/racist country/200% GDP debt-laden country/etc.).

An end to the Japanese lesson or Still ?

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