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Will Japan go bankrupt?
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Pitarou



Joined: 16 Nov 2009
Posts: 893
Location: Narita, Japan

PostPosted: Tue Jan 14, 2014 11:40 pm    Post subject: Reply with quote

steki47 wrote:
Not attacking you personally. Just questioning the field of economics. Willing to listen, though.

My degree is in anthropology. Lots of BS there as well.

Sorry! I didn't mean to suggest I felt personally attacked. I was complaining about the "this is all bullhshit" liine of argument. (Frankly, that line of reasoning sounds like the reasoning of people who don't want to think about what's actually going on.)

Anyway, regarding the article about the surge in the Nikkei CoolTeacher posted earlier, look at this graph, which shows what's going on: graph at Zero Hedge.

Do you see what that tells us? The Nikkei index and the USD / JPY exchange rate are correlated to an extraordinary degree. I was amazed when I saw that graph. I knew they'd be correlated, but not that strongly!

So, in effect, the Nikkei index and the USD / JPY exchange rate are now two sides of the same coin.

Compare these two headlines:

1. Nikkei surges after Bank of Japan implements bold quantitative easing policy.

2. Yen plummets after Bank of Japan prints vast quantities of money.

The first is the policy success trumpeted in the article Cool Teacher linked to talks about. The second is a cynical debasement of the coin of the realm. But the're the same thing!
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rxk22



Joined: 19 May 2010
Posts: 897

PostPosted: Fri Jan 17, 2014 1:51 am    Post subject: Reply with quote

The Nikkei has little bearing on the actual Japanese economy. As the companies listed there make a massive amount of their rev outside of Japan.
Also, with Abenomics, a good deal of outside money in flowing into Japan via funds and ETFs, pushing the Nikkei up higher.

Though the deflation has allowed many Japanese companies to become more profitable. I looked at a lot of finacial reports, and most Japanese companies are in the black, when many were deep into the red just 2 years ago. Heck even Panasonic looks like it is going to be OK, and they were a zombie company if I ever saw one. Though Sharp and Fujitsu are dead in the water
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Pitarou



Joined: 16 Nov 2009
Posts: 893
Location: Narita, Japan

PostPosted: Fri Jan 17, 2014 7:03 am    Post subject: Reply with quote

rxk22 wrote:
Though the deflation has allowed many Japanese companies to become more profitable. I looked at a lot of finacial reports, and most Japanese companies are in the black, when many were deep into the red just 2 years ago. Heck even Panasonic looks like it is going to be OK, and they were a zombie company if I ever saw one. Though Sharp and Fujitsu are dead in the water

Yes, that's the best thing about the weak yen. It puts companies like Honda back in the black. Pay your workers in yen, sell your goods in dollars: PROFIT! It's like a return to the days of low-wage, high-quality manufacturing that made Japan so successful in the '60s. But, as I've said before, the giants of the Nikkei do not represent Japan as a whole. Japan is actually a net importer.

If Japan had pursued today's policy's about 10-15 years ago, things may well have been very different. In fact, I distinctly recall, as a wet-behind-the-ears economics undergrad, I felt pretty smart when I asked my supervisor, "Why doesn't Japan just print lots of cash? It what would make a huge dent in the problems Japan is facing." He answered, "It may not be a crazy idea, but it's a taboo that nobody's willing to break at the moment." And he was right: if Japan had broken the taboo at that time, the political consequences would have been unacceptable. I guess that's what happens when you let politicians run a country. Wink

Now the taboo is well and truly broken, but it's much, much too late. The problems is that, banks gorged on Japan Government Bonds (JGBs) in the noughties so now, to a rough approximation, the entire stock of available savings has been absorbed in JGBs. Inflation directly affects bond values and, after Abe took over the the Bank of Japan (BoJ) by replacing the governor, he set an inflation target of 2%. The associated fall in bond prices would hit banks' capitalization hard, so the BoJ has had to prevent this by propping up bond prices with what amounts to an open-ended promise to use freshly printed [1] money to buy bonds at well above their true market value.

The government is now so deep in the red that it has to issue huge numbers of bonds just to keep the debt mountain rolling over. (I.e. they're buying new bonds to pay off old ones that have come to maturity.) But the only buyer is the BoJ. This means that, in effect the government is now printing money to finance its own expenditure, and there is no easy way to stop it. [2]

This is an extremely dangerous policy. Japan is a hair's breadth from very rapid (maybe even hyper-) inflation. As they like to say at Zero Hedge: this can't end well.

-----
Notes for the pedants:

[1] Not literally printed.

[2] The BoJ is technically separate from the government, and it is not allowed to buy bonds directly from the government. Unfortunately, these have become distinctions without a difference.
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rxk22



Joined: 19 May 2010
Posts: 897

PostPosted: Sat Jan 18, 2014 4:08 pm    Post subject: Reply with quote

I agree with what you say about the printing. Though economics is not logical, and doesn't seem to work in how we think it will. Just look at QE, and what is has done/hasn't done in the economic world.

That said, I don't think that Japan should have a massively cheap currency. I mean ideally $1 should be 110 or so yen. When the yen was expensive, I read an article that only the Mazda CX-7 was profitable at ¥80 tot he dollar. That rate is too expensive for Japanese industries to survive.


Look at pre WWI UK. It was a net importer. It's massive foreign holdings kept it going. WWI and the crisis knocked the UK out of the top, and I personally think it still hasn't recovered from and adapted to it's pre WWI situation. Perhaps Japan can? Though I do see some serious printing ahead either way
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Cool Teacher



Joined: 18 May 2009
Posts: 856
Location: Here, There and Everywhere! :D

PostPosted: Sun Jan 26, 2014 5:46 am    Post subject: Reply with quote

Pitarou wrote:
Cool Teacher wrote:
Hi there folks I dont know anything about finances but I saw this news articles and thought ti would be useful for people discussint things here. I dont know how true it is but they say Japan is doing well now and Eurpe should follow them. Surprised

Quote:
Extraordinary boldness on the part of Japan’s leaders has jump-started an economic recovery and sent the Tokyo stock market soaring. Could the same be about to happen in Europe?
In a multi-pronged attack on Japan’s decades-long economic stagnation, its central bank is printing a mountain of new money. This has revitalised exporters by devaluing the yen and turned the tide in the war against falling prices – which sound attractive but actually suck the life out of economies by encouraging people to delay spending and save instead.


http://www.telegraph.co.uk/finance/personalfinance/investing/shares/10562884/Will-Europe-follow-Japan-and-send-its-stock-market-soaring.html

Oh, for fuсk's sake. I have better things to do than enumerate all the things that are wrong with that article.

The Nikkei is an indicator of the nation's economic health, but hardly a perfect one. In this case, the Nikkei rose for two reasons:

1. The Bank of Japan is conjuring up money out of thin air to buy Japan Government Bonds at prices that don't make sense. Much of that money ends up on the Tokyo Stock Exchange.

2. All these yen appearing out of nowhere pushes down the price of the yen. This is great for companies like Honda that pay their workers in yen but sell their cars in dollars. And these are the companies whose shares dominate the Nikkei.

So a weakened yen is a is good for Honda, but Honda isn't representative of Japan. Ever since they shut down the nukes, Japan has been a net importer, so any fall in the value of the yen has the effect of a pay cut.

In short, this is good news only if you think it would be nice for Japan to return to being a low wage manufacturing exporter, like back in the '50s, or like China still is today. rxk22 seems to like that idea. But, like I said earlier, the transition is going to be extremely painful.
Cool Teacher wrote:
Also I odnt think there will be a war beteern China and Japan.

On that point, your guess is as good as mine.


Language, Timothy! Very Happy

What was that from again? Confused

Cool
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Pitarou



Joined: 16 Nov 2009
Posts: 893
Location: Narita, Japan

PostPosted: Sun Jan 26, 2014 7:41 am    Post subject: Reply with quote

Cool Teacher wrote:
Language, Timothy! Very Happy

What was that from again? Confused

Cool

It was from Some Mothers Do Have Them.

And I did apologise for cussing earlier.

----

edit

Sorry. It wasn't Some Mothers Do Have Them. It was ... um ... Sorry!.
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Cool Teacher



Joined: 18 May 2009
Posts: 856
Location: Here, There and Everywhere! :D

PostPosted: Sun Jan 26, 2014 10:40 am    Post subject: Reply with quote

Pitarou wrote:
Cool Teacher wrote:
Language, Timothy! Very Happy

What was that from again? Confused

Cool

It was from Some Mothers Do Have Them.

And I did apologise for cussing earlier.

----

edit

Sorry. It wasn't Some Mothers Do Have Them. It was ... um ... Sorry!.


No problem my dear! Wink

I will read your posts carfeully and try to understand them. My economics knowledge is very low. Confused

Sorry! Cool
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Cool Teacher



Joined: 18 May 2009
Posts: 856
Location: Here, There and Everywhere! :D

PostPosted: Tue Feb 04, 2014 1:34 pm    Post subject: Reply with quote

Hey your right Piarou! Very Happy

The Nikkei is "tumbling".


Nuff Respek! Cool

http://www.theguardian.com/business/2014/feb/04/markets-slide-nikkei-europe-ftse-business-live
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Cool Teacher



Joined: 18 May 2009
Posts: 856
Location: Here, There and Everywhere! :D

PostPosted: Tue Feb 04, 2014 1:36 pm    Post subject: Reply with quote

But the low yen helps Toyoat! Smile

http://www.theguardian.com/business/2014/feb/04/toyota-record-profit-yen-japan-sales
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Pitarou



Joined: 16 Nov 2009
Posts: 893
Location: Narita, Japan

PostPosted: Tue Feb 04, 2014 11:27 pm    Post subject: Reply with quote

Cool Teacher wrote:
Hey your right Piarou! Very Happy

The Nikkei is "tumbling".


Nuff Respek! Cool

--------

http://www.theguardian.com/business/2014/feb/04/markets-slide-nikkei-europe-ftse-business-live

But the low yen helps Toyoat! Very Happy

http://www.theguardian.com/business/2014/feb/04/toyota-record-profit-yen-japan-sales
These are just day-to-day fluctuations. Look at the Nikkei chart going back over, say, 5 years, and you won't even spot the blip.
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