Is Japan entering the U.S. nightmare?

Someone from the LDP has proposed using Japan's wealth to shore up the U.S. financial market. A perceptive commentator has said this could probably turn Japan into the next Iceland, which has been severely affected by the global financial cataclysm.

My advice--don't let the LDP touch the taxpayer's money. It has no understanding of economics. It can only make matters worst in its desperate efforts to stay in control.

Aso wants to enact a huge fiscal stimulus package financed by what? Bonds? The gov't already owes about 1.5X annual national GDP. The service rate of the current debt at the current low interest is staggering. When interest rates rise in the near future, the government won't be able to borrow money at all and will have to raise taxes a huge amount. ☝

Dogen Z said:

Someone from the LDP has proposed using Japan's wealth to shore up the U.S. financial market. A perceptive commentator has said this could probably turn Japan into the next Iceland, which has been severely affected by the global financial cataclysm.
My advice--don't let the LDP touch the taxpayer's money. It has no understanding of economics. It can only make matters worst in its desperate efforts to stay in control.
Aso wants to enact a huge fiscal stimulus package financed by what? Bonds? The gov't already owes about 1.5X annual national GDP. The service rate of the current debt at the current low interest is staggering. When interest rates rise in the near future, the government won't be able to borrow money at all and will have to raise taxes a huge amount. ☝

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Don't worry. Nobody can help US economy as it's too big.

USA has long been a Big Buyer for the world economy, and nobody can replace USA. So, the world must prepare a long term recession

The point is when US economy will recover? Probably nobody know either as they pursued extreme market oriented Capitalism. Result is obvious ..... almost all manufacturing sector in USA is in an extremely precarious position.

Weak Worldwide Recovery

I think one thing no one has mentioned, AFAIK, is that whatever recovery occurs will be very weak as was the recovery in Japan. There will be no drivers for growth in the U.S. or Europe because of aging population and stringent credit conditions. Emerging markets will do better because they have young populations and a lot of room to catch up with the developed countries but I think this growth will take a long time, maybe decades.

So, I think we should all be very thrifty from now on and shouldn't spend Aso's handout.

Dogen Z said:

So, I think we should all be very thrifty from now on and shouldn't spend Aso's handout.

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That handout comes from the tax payers' money.

Aso is doing an extremely poor job of explaining how the 2 trillion yen fiscal stimulus is supposed to work. In fact, he doesn't seem to know himself judging by the discussions in the Diet. It's supposed to work by increasing the velocity of money in circulation but I'm afraid most of the money will be simply be absorbed/hoarded--a needless waste of resources the gov't doesn't have. As one politician has said, it's ultimate stupidiy.

Dogen Z said:

Aso is doing an extremely poor job of explaining how the 2 trillion yen fiscal stimulus is supposed to work. In fact, he doesn't seem to know himself judging by the discussions in the Diet.

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That is a very fitting description. Especially, when his foot is always in his mouth, I think it would be difficult for him to make any intelligent statements. Maybe, people say "Next" to the revolving premiership in Japan to usher in the next guy...

Deep Recession

The Japanese economy, like the U.S. economy, is just starting to contract, and I'm afraid it's gonna bite really, really hard, stimulus or no stimulus. The illegal practices of companies that we are seeing more and more of will naturally make things even worse.

You'd better brush up on your Plan B if you have one. If you don't have one, you should make one.

at frist, The economic stimulus measure that the United States can do now is only a war.
It was able to be balanced by making up for the United States deficit by the
surplus of Asia.
And, the pattern that grew up both was established.
However, American consumption stops when the United States saves money and export of Asia toward America decreases.
The recession of Asian economy doesn't stop either.

The global warfare has occurred when the simultaneous slowdown of the world economy doesn't stop whenever looking back on the history.
However, it is possible to get rid of the recession even if it is not the war.

For what is it appreciation of the yen?
if Asia, especially Japan does , it can
Japan has to make a policy to escalate consumption out of savings
The government should work out a drastic domestic demand stimulation plan, and promote "Buy America".
If the Asia export of the United States begins to expand, the US production also faces the recovery.
Asia should recognize the importance the mission of helping the United States, and helping oneself

and Japan should recognize it especially.

caster51 said:

Asia should recognize the importance the mission of helping the United States, and helping oneself
and Japan should recognize it especially.

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All Asian economic developments over the last 50 years or so have been driven by exports. Japan's self-extraction from the post bubble period of the lost decade was fueled by its export business.

Even though this economic model cannot be sustained, people fell into the false hope good times would continue (even there was a laughable concept of decoupling Asian economies from Western markets). I doubt the Asian economic zone can recover from this severe recession by itself.

Dogen Z said:

Someone from the LDP has proposed using Japan's wealth to shore up the U.S. financial market. A perceptive commentator has said this could probably turn Japan into the next Iceland, which has been severely affected by the global financial cataclysm.
My advice--don't let the LDP touch the taxpayer's money. It has no understanding of economics. It can only make matters worst in its desperate efforts to stay in control.
Aso wants to enact a huge fiscal stimulus package financed by what? Bonds? The gov't already owes about 1.5X annual national GDP. The service rate of the current debt at the current low interest is staggering. When interest rates rise in the near future, the government won't be able to borrow money at all and will have to raise taxes a huge amount. ☝

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Well there will be some stimulus, and I suspect some reform. The Japanese govt actually has the capacity to tax considerably more. I think the burden will fall on property holders rather than consumers. The staggering debt is owed by govt to taxpayers, not to foreigners, so the govt can borrow because it can tax. As long as govt has the power to tax, and people grant that right too readily, they will always pay. It means very little for the govt to be in debt to taxpayers if the govt can increase taxes. So domestic debt is essentially no debt. It has more of a psychological impact in terms of not having savings you thought you had.

Shouganai said:

... It means very little for the govt to be in debt to taxpayers if the govt can increase taxes. So domestic debt is essentially no debt. It has more of a psychological impact in terms of not having savings you thought you had.

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LDP thinking? Taxes cannot be increased indefinitely anymore than debt can. There would be both economic and political consequences. The domestic economy would contract with an increase of domestic taxes and the political party that supported those taxes would be ousted.

Dogen Z said:

LDP thinking? Taxes cannot be increased indefinitely anymore than debt can. There would be both economic and political consequences. The domestic economy would contract with an increase of domestic taxes and the political party that supported those taxes would be ousted.

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You would be surprised how much taxes can be increased in a time of crisis. Its even easier when your effectively the only party in the system. They don't have to raise taxes now, they can raise them later. They just spend now. Domestic contraction? That's a given? Productive investment? That depends on what they spend it on. Oh, and you think this is competitive political system do you. You clearly don't get it, but there is no competition in politics. The major parties have rules of engagement. There is things they don't compete on. Either way, you will be screwed. If a party increases taxes, do you see the next party decrease them...hardly, and certainly not by socialists. So higher taxes are coming. The point was - it does not matter when the taxpayer is paid 1% - they are already subsidising govt, they just don't know it. Do you think that is the real cost of capital in the global market place?

caster51 said:

at frist, The economic stimulus measure that the United States can do now is only a war.
It was able to be balanced by making up for the United States deficit by the
surplus of Asia.
And, the pattern that grew up both was established.
However, American consumption stops when the United States saves money and export of Asia toward America decreases.
The recession of Asian economy doesn't stop either.
The global warfare has occurred when the simultaneous slowdown of the world economy doesn't stop whenever looking back on the history.
However, it is possible to get rid of the recession even if it is not the war.
For what is it appreciation of the yen?
if Asia, especially Japan does , it can
Japan has to make a policy to escalate consumption out of savings
The government should work out a drastic domestic demand stimulation plan, and promote "Buy America".
If the Asia export of the United States begins to expand, the US production also faces the recovery.
Asia should recognize the importance the mission of helping the United States, and helping oneself
and Japan should recognize it especially.

Click to expand...

The US is too productive and supplies too many nations raw materials and food. If the US economy collapses, millions around the world will starve and suffer. The US will not be able to afford to produce and export. So the shortages will drive up the price of the things they CAN produce. Then, as long as they still have their mines and farms secure, and have not sold them to foriegn nationals, They simply restart production, and supply the demand for even more money.

Can Saudi Arabia EVER go broke, if they have not sold their oil fields to foriegners and have them secure? NO. Not as long as their foriegn creditors need oil.

You cannot starve a farmer into submission, only God can do that.

Shouganai said:

Oh, and you think this is competitive political system do you. You clearly don't get it, but there is no competition in politics. The major parties have rules of engagement. There is things they don't compete on.

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Oversimplistic and outdated. Hilary Clinton didn't request a meeting with the opposition camp leader just because she's a sociable person. The populace is tired to the fiscal mess the LDP has created and is trying to perpetuate. Change is coming.

BTW, you needn't confuse issues by introducing things such as the global cost of capital. Actually, a 1% return is pretty good if we fall into a deflationary spiral.

Dogen Z said:

Oversimplistic and outdated. Hilary Clinton didn't request a meeting with the opposition camp leader just because she's a sociable person. The populace is tired to the fiscal mess the LDP has created and is trying to perpetuate. Change is coming.
BTW, you needn't confuse issues by introducing things such as the global cost of capital. Actually, a 1% return is pretty good if we fall into a deflationary spiral.

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And you are arguing what? Change? Two sides of the same coin my boy. And Obama is going to pay for these expenditures - how? More debt, or is it dilution? Gratuities from the Arabs and Chinese?
No, I think 1% return is pretty bad in most people's terms, but thanks for conveying your low standards.

Potential New Leaders

JerseyBoy said:

That is a very fitting description. Especially, when his foot is always in his mouth, I think it would be difficult for him to make any intelligent statements. Maybe, people say "Next" to the revolving premiership in Japan to usher in the next guy...

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Outstanding politicians in Japan, as in the rest of the world, are very rare. However, I'm impressed by two: Seiji Maehara of the DPJ and Governor Hashimoto of Osaka. Both are relatively young and are not afraid to speak up. At a debate in the parliament (Diet), Maehara recently called Prime Minister Aso a "fraud" and his spending of highway taxes a "crime." Aso didn't directly answer the charges. Governor Hashimoto, otoh, has publicly denounced the Ministry of Education and the Ministry of Transportation for policies that are contrary to his constituents interests. In fact, he has told both that he would not comply with their policies. Bucking the central government is almost unheard of. Way to go, you guys!

Even though this economic model cannot be sustained, people fell into the false hope good times would continue (even there was a laughable concept of decoupling Asian economies from Western markets). I doubt the Asian economic zone can recover from this severe recession by itself.

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It is likely to become quite irrelevant though the market is expected of Obama's economic stimulus measures now.

I am not telling it that Asian nations must export to the United States further.
It will deteriorate American economy further.

The U.S. is a premier consumer-driven superpower where spending comprises a massive 70% share of the nation's GDP.
In the corporate sector, weakened consumer spending quickly translates into sinking sales, capital investment cutbacks and personnel reductions. The U.S. unemployment rate now stands at 7.2% to 8 %. This is twice the level of 2007.

All Asian economic developments over the last 50 years or so have been driven by exports. Japan's self-extraction from the post bubble period of the lost decade was fueled by its export business.

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it was nothing to do with that at that time
It was a myth of ever-higher land prices.
The bubble broke by the land restriction.

anyway
Consumption brings the expansion of the domestic demand further.
Therefore, the policy of stimulating consumption from savings is necessary.

caster51 said:

it was nothing to do with that at that time
It was a myth of ever-higher land prices.
The bubble broke by the land restriction.
anyway

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Nothing happens in a vacuum. The property bubble was caused by the booming export industry. Export businesses were the major catalyst for the Asian economic growth.

Nothing happens in a vacuum. The property bubble was caused by the booming export industry. Export businesses were the major catalyst for the Asian economic growth

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was US also bubbled by booming export industry?
of course ,economic growth is important.

after Plaza Accord in 1985, Japanese export industry was not good bacause of getting high Yen.
It is because excessive liquidity is generated, and the capital flows to land and the stocks.
The expansionist policy of public works was taken.
The expansion of personal consumption was increase.

caster51 said:

It is because excessive liquidity is generated, and the capital flows to land and the stocks.
The expansionist policy of public works was taken.
The expansion of personal consumption was increase.

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I am betting against Japan now as this recession will force a significant structural change in Japan's economy (to the worse).

The public works won't cut it in this economy (the country is already filled with roads and infrastructures). It would be just a repeat of what they did in their attempt to recover from the post-bubble recession in the 90s. Maybe another infamous bridge to nowhere? A bridge to North Korea in a desperate attempt to come up with a public work project?

The public works won't cut it in this economy (the country is already filled with roads and infrastructures). It would be just a repeat of what they did in their attempt to recover from the post-bubble recession in the 90s. Maybe another infamous bridge to nowhere? A bridge to North Korea in a desperate attempt to come up with a public work project?

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I am not talking about Keynesian economics
Old Keynesian economics was already done in Japan..
The domestic demand expansion is not only an investment in public works.
The importance is personal consumption.

caster51 said:

I am not talking about Keynesian economics
Old Keynesian economics was already done in Japan..
The domestic demand expansion is not only an investment in public works.
The importance is personal consumption.

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Well, your post said about the public works. (never mind, it does not matter, really).

I am not holding my breath for rising personal consumption in Japan. The current economic downturn attests the severe contraction of the Japanese economy.

After all things are said and done, it boils down to the country's fundamental strength.
Japan: a small mountainous island nation with rapidly aging population.
USA: a large country with the mix of economic ingenuity & natural resources. For example, I would rather own a good property in USA than the one in Japan.


Not to mention the pathetic behavior by J-gov's Finance Minister at the G7 meeting (which really illustrates Japanese government's response to its economic recession)...

Wow! This is a fascinating and meaty thread! I am excited by the responses, even as I know it is going to take days and days to digest everything well enough to comment intelligently. Still, this does not stop me from wanting to weigh in on this issue.

On the face of it, no, Japan is not going to fall into the same economic issues facing the U.S. presently. The simple answer as to why not would be vastly different demographics.

First, Japan has an aging and shrinking population, which poses a very different problem than that faced by the U.S. and its rising unemployment rate. Specifically, over time there promises to be an insufficient number of Japanese to meet employment and infrastructural needs. On the other hand, in the U.S. we have a surplus of employees in a shrinking job market. In a brief response to those discussing raising Japan's taxes as a way to pay for its debt, this simply is an impossibility with Japan's shriking tax base.

Secondly, Japan is actually ahead of the U.S. in the current issue of tackling a struggling economy in that Japan has been using government created jobs (such as in infrastructure construction and maintenance) to shore up the domestic economy for nearly two decades now. As a short term solution, entry level jobs created in the public sector work well to stop economic hemmoraging. However, the danger is, as I think can be seen in Japan, that local economies, and indeed the national domestic economy, can become dependent upon those publicly-funded jobs. Simply, individuals and municipalities never want to engage in the painful process of weening themselves from government money / jobs and move back into the private sector. It will be interesting to see if the same issues arise in the U.S. as the Obama administration seeks to create government funded jobs as part of its economic stimulus package.

Finally, Japan faces an even more dire prospect of not being able to afford to import the variety of resources they are desparately short of given their geographic environment. The U.S., despite having some notable shortages of resources, such as in fossil fuels, is more generously gifted with an abundance of natural resources to fall back on.

So, is Japan following the path of the U.S. in regards to economic difficulties? I would say no, the path that Japan faces is somewhat more dire. And in other cases, Japan is actually further down the path of economic woe caused by collapsing real estate value and insolvent assests held by the majority of local and national banks. Perhaps the question should be, is the U.S. following in Japan's footsteps?

Very good points, konki, thanks for your input. I started this thread as a jest to Astroboy's (r.i.p.) numerous post about other countries entering the "Japanese nightmare." If you don't already know, there is another thread about the U.S. entering the Japanese nightmare.

My real concern is that Japan and the rest of the world is crumbling due to foolish mortgage lending practices in the U.S. It almost seems as though the global economy is a huge house of cards. So I'd be very cautious about any investments I make in the future, (even especially from fast talking real estate hustlers).

Thanks for your input konki d. You mention great points.

I believe that yes, Japan is entering into the US nightmare (as was planned) as many of their banks are now owned by American interests and/or a conglomoration of US and/or foreign companies and they were duped into buying Mortgage Backed Securities (MBS's) Collatoralized Debt Obligations (CDO's), Asset Backed Securities (ABS's) etc, that the US banks/investment firms KNEW were going to collapse, but sold them anyway to an unsuspecting public believing that what was in the news was fact when all involved knew it was a scam.

It all happened during the Koizumi (the "Obama" of Japan as he "related" to so many young people) and Bush administrations, initiated in the Clinton administration, and where the formerly privatized Post Office Savings accounts in Japan (the safest of all investments in Japan) were made public and sold off to foreign investors. In effect these savings of the Japanese peope were hijacked and stolen as if they stuck a gun in their face and asked to turn over all their money. Why the Japanese are not outraged is beyond me, but the major media, also controlled by foreigners, could be a major player in seducing the Japanese public.

Now, JAPAN IS in America's nightmare as they hold billions in mortgage securities that are basically worthless. Thus, you see the stregthening of the yen, which has declined in recent days, so they may recoup some of their losses. It's all a game played by the elites and wealthy and the Japanese public was duped as was was Europe and the US, all at taxpayers expense, in order to pave the way for a one world bank and a one world government. The World Bank will come first and the hardworking working class of the major countries of the world will get to pay for this World Bank through a false "carbon tax" in the guise of staving off "global warming" LOL).

Does anyone not notice that the currencies of the world are nearing parity as well as the stock markets? Soon we will hear calls for a world bank as most major currencies and stock markets are nearly equal anyway. One look at the DOW, FTSE, NIKKE, etc should convince you of that. They are nearly equal when you factor in exchange rates! How can that be?

Besides, Greenspan, (who started all of this anyway) mentioned in a speech yesterday that he "made a mistake in lowering interest rates in 2001" and that there "may be" no choice but for the major banks to be nationalized and taken over by the governments. Until then, I believe, things will only get worse and the US will NEVER, EVER, survive this downturn as the USofA as we knew it and were taught will be a thing of the past as was planned and is coming to fruition.

The president of the US, as well as the Prime Ministers of Japan, England, and the other major countries all have their strings pulled by people who actually run things or they would not be in power. Does anyone really think and believe that the Japanese financial minister was drunk at a press conference during the G-7 meeting or was it a ruse to push someone not cooperating from power and influence in order to get their own person in there? (If so please provide me with a link as I have not been able to discern through videos if he was drunk or not.)

Before you tell me I am wrong, wait about a year and then post your comments. In other threads I predicted that what we are experiencing today would come to pass, especially with the housing crisis in the US, and I was called a fool and a conspiracy nut and derided by others. Sadly, it has all come to pass and will only get worse unless people wake up to what is being pulled over their heads and say something about it.

Will Japan survive this mess? Yes it will as will China and most Asian countries as they are creditor nations who lend their money to the US and other countries. Will the US and Europe survive? No, the US will not survive, but a few nations in Europe will survive like Switzerland and Norway and a few other countries like Australia. But the US MUST fall first or there will be no one world bank or government. Keep a sharp eye on the US and watch gold and silver prices for the indicator that most money is on the US and Europe failing.