Site Search:
 
TEFL International Supports Dave's ESL Cafe
TEFL Courses, TESOL Course, English Teaching Jobs - TEFL International
Job Discussion Forums Forum Index Job Discussion Forums
"The Internet's Meeting Place for ESL/EFL Students and Teachers from Around the World!"
 
 FAQFAQ   SearchSearch   MemberlistMemberlist   UsergroupsUsergroups   RegisterRegister 
 ProfileProfile   Log in to check your private messagesLog in to check your private messages   Log inLog in 

Will Japan go bankrupt?
Goto page 1, 2, 3  Next
 
Post new topic   Reply to topic    Job Discussion Forums Forum Index -> Japan
View previous topic :: View next topic  
Author Message
rxk22



Joined: 19 May 2010
Posts: 909

PostPosted: Tue Jan 07, 2014 10:14 pm    Post subject: Will Japan go bankrupt? Reply with quote

I am curious, as there are a lot of doom and gloomers as well as 'it's 100% OK' articles out there. None of which, I think really truly cover Japan's situation well.

Japan's govt is still in a massive spending deficit, something around 49% of the budget is made on bonds. Which is scary. On the other hand, the interest servicing of it are still pretty low.

I was hoping that Abe(I know) would be able to kick the deficit, and pay down the debt before the population started to decrease, and the tax base with it.

What is your outlook ,and you reasoning?
Back to top
View user's profile Send private message
Pitarou



Joined: 16 Nov 2009
Posts: 898
Location: Narita, Japan

PostPosted: Wed Jan 08, 2014 12:28 am    Post subject: Reply with quote

The optimists basically have one argument in their favour: People have been predicting doom for years, and it hasn't happened yet. This is called "the fallacy of inductive reasoning". Go look it up.

The writing is on the wall. The financial statistics are beyond debate. It's just unavoidable: Japan is financially doomed. It's as clear and as simple as that.

When you're deciding which pundits to believe, notice who gives you facts and figures, and who gives you vague handwavy stuff. I find that every time an optimist says something like, "Don't worry. Japan still has x to fall back on." a pessimist gets his calculator out and shows just how small x really is compared to the scale of the problem Japan is facing. Whatever the "solution" is, Japan's problem turns out to be much, much bigger. It's much worse than Greece, for instance.

Yes, Japan still pays low interest on its bonds. But the only people buying bonds at those prices are the Bank of Japan, and they do it by conjuring money into existence at the stroke of a pen. There is a fine line between "quantitative easing" and "debt monetisation", and the BoJ crossed that line a long time ago. This "Zimbabwe solution" is the only real policy success of Abenomics. The "structural reforms" that Japan so desperately needs have been blocked by vested interests.

Sooner or later, the other shoe will drop, there will be a "qualitative shift in market perception", the yen will probably fall to less than half its present value, and there will be carnage in the markets.

Those in the know have been quietly moving their financial assets out of Japan for some time. (For instance, those few large established Japanese firms with a healthy balance sheet have been on a massive overseas acquisition spree in recent years.) If you wait until it hits the fan, it may well be too late: you may well be blocked from moving your money out of the country, just like the people of Cyprus and Iceland were.


Last edited by Pitarou on Wed Jan 08, 2014 2:14 am; edited 1 time in total
Back to top
View user's profile Send private message
rxk22



Joined: 19 May 2010
Posts: 909

PostPosted: Wed Jan 08, 2014 2:10 am    Post subject: Reply with quote

That is more or less in line with what I have been thinking. I was hoping for rainbows and sunshine...
I really was hoping that the govt would squash the debt and not inflate it's way out. Seems like Keynes is their advisorif you know what I mean.

The banks, according to bloomberg hold 41% of the Japanese debt in bonds. I guess that ratio will go higher, as no one would want a bind with a ~1% yield. That worked when deflation was -1%. So you got a 2% yield that way.

This article is making me seriously reconsider coming back to Japan, http://articles.economictimes.indiatimes.com/2013-01-11/news/36279777_1_low-interest-rates-government-debt-japanese-growth

I could see the yen hitting 400 to the dollar to be honest. The new trade deficit is alarming as well. Yes Nuclear in Japan is awful, and was/is poorly run, but they are killing their economy now.

That and the farmers/construction. They just need to cut them off at this point. No reason to make all these roads and what not, esp with rural areas having population loses. I would like to see large family farms, instead of subsidizing some guy with 5 acres. I lived in Chiba, and saw that most holders had peasant sized plots.

Well it isn't just because of the current situation. With the yen devaluing, it was wise to convert that in foreign currency. And acquisitions are needed for domestic companies. Softbank just guaranteed it's future with Sprint.
I don't have much in yen, and even if I go back, I would still save my money in dollars,as it just makes sense too.

Well when the yen hits 400, they can always cash in their US bonds, and pay off the debt then Cool
Back to top
View user's profile Send private message
Pitarou



Joined: 16 Nov 2009
Posts: 898
Location: Narita, Japan

PostPosted: Wed Jan 08, 2014 2:21 am    Post subject: Reply with quote

rxk22 wrote:
I really was hoping that the govt would squash the debt and not inflate it's way out


[deleted -- I didn't notice the word "not" in the above sentence]


Last edited by Pitarou on Wed Jan 08, 2014 3:53 am; edited 1 time in total
Back to top
View user's profile Send private message
rxk22



Joined: 19 May 2010
Posts: 909

PostPosted: Wed Jan 08, 2014 2:29 am    Post subject: Reply with quote

I was hoping that he would massively cut the deficit and then work on the debt.

This article is interesting, talks on how a default may be better than austerity for Japan. Who knows?

http://noahpinionblog.blogspot.com/2013/06/should-japan-default_12.html
Back to top
View user's profile Send private message
Pitarou



Joined: 16 Nov 2009
Posts: 898
Location: Narita, Japan

PostPosted: Wed Jan 08, 2014 3:41 am    Post subject: Reply with quote

rxk22 wrote:
I was hoping that he would massively cut the deficit and then work on the debt.

The huge fiscal adjustment needed to do that would be politically impossible outside of a crisis.
rxk22 wrote:
This article is interesting, talks on how a default may be better than austerity for Japan. Who knows?

http://noahpinionblog.blogspot.com/2013/06/should-japan-default_12.html

That's an astute analysis, but I can't imagine the political class taking the bold decision to default when they have the option of cranking up the printing presses just a bit higher.

So what does this mean for us?

1. The safest place to keep your savings is not in Japan, not in Japanese financial institutions, and not in yen.

2. If you're an ALT, plan for unemployment. You're likely to become an unaffordable luxury in the not-too-distant future. (Even if Japan defaults, the government will still have to cut spending.)

3. For English teachers in general, expect tougher times ahead. There seems to a strong correlation between Japan's economic performance and English teachers' salaries.

4. If you're planning on sticking around, expect an exciting ride. And ... who knows ... if you can keep your head when all around are losing theirs, you might just come out well. We can expect the biggest fire-sale of Japanese assets since the War.
Back to top
View user's profile Send private message
Pitarou



Joined: 16 Nov 2009
Posts: 898
Location: Narita, Japan

PostPosted: Wed Jan 08, 2014 11:27 am    Post subject: Reply with quote

By the way, you asked for articles.

Here's an excellent talk by highly-respected Japan-pessimist Kyle Bass, which he gave about 9 months ago. In a sentence his message is this: Japan is all out of options.

http://media.chicagobooth.edu/Mediasite6/Play/f15d95d054e8442ab0cc1c60321383101d
Back to top
View user's profile Send private message
rxk22



Joined: 19 May 2010
Posts: 909

PostPosted: Wed Jan 08, 2014 10:33 pm    Post subject: Reply with quote

I was thinking that as well. It would take an actual crisis for the businesses and old people to willingly give up their benefits.

I think a smaller leaner Japan, can and will be successful. It will still have the all the export orientated industries, without the rural and old to hold it back.


Wow, yeah I really have nothing to say to this. I do not see how Japan will not go bankrupt. It may take a while, but I don't see how it won't. Seriously, WOW Shocked
Back to top
View user's profile Send private message
rxk22



Joined: 19 May 2010
Posts: 909

PostPosted: Wed Jan 08, 2014 10:40 pm    Post subject: Reply with quote

Pitarou wrote:
By the way, you asked for articles.

Here's an excellent talk by highly-respected Japan-pessimist Kyle Bass, which he gave about 9 months ago. In a sentence his message is this: Japan is all out of options.

http://media.chicagobooth.edu/Mediasite6/Play/f15d95d054e8442ab0cc1c60321383101d


Yeah, and just wanted to quote this again. Yikes!

I did get a really nice private school offer in Japan. Man, and it is really tempting, as my wife prefers living in Japan. But man, the debt is just alarming.
Back to top
View user's profile Send private message
Pitarou



Joined: 16 Nov 2009
Posts: 898
Location: Narita, Japan

PostPosted: Thu Jan 09, 2014 2:36 am    Post subject: Reply with quote

rxk22 wrote:
Yikes!

I did get a really nice private school offer in Japan. Man, and it is really tempting, as my wife prefers living in Japan. But man, the debt is just alarming.

That could be hard on your relationship. Most ordinary Japanese have no idea how bad it really is, and there are still plenty of optimistic rent-a-quotes who tell people what they'd rather hear. Institutions like the NHK are going to play along and pretend everything is fine right to the bitter end. Who's your wife going to listen to?

Only you can decide whether a nice private school and a happy wife are worth the financial hazards, but forewarned is forearmed.
Back to top
View user's profile Send private message
steki47



Joined: 20 Apr 2008
Posts: 659
Location: BFE Inaka

PostPosted: Thu Jan 09, 2014 2:42 am    Post subject: Reply with quote

rxk22 wrote:
I think a smaller leaner Japan, can and will be successful. It will still have the all the export orientated industries, without the rural and old to hold it back.


Along similar lines, I can see the Japanese moving back to being, well, Japanese. Closer to the lifestyle they generally had in 1960s-small houses, domestic food (they are importing 60% of their food currently) and such. If you look at the Bubble Years as an fluke where the middle class had a lot of dispoable income, you can imagine the Japanese living on a lot less.

Japan still produces some high quality products for export and they are a reasonably well-behaved, productive population. It will be a bumpy ride, but I can see things smoothing out in 10-20 years.

I told my wife if the poop really hits fan (economic crash, war with China), we may look into jobs in SE Asia.
Back to top
View user's profile Send private message
Pitarou



Joined: 16 Nov 2009
Posts: 898
Location: Narita, Japan

PostPosted: Thu Jan 09, 2014 2:59 am    Post subject: Reply with quote

You paint quite an appealing picture. But I think the transition is going to be pretty ugly. In my most pessimistic moments, I see the pieces set out for a major war with China.

But that's just me scaremongering. I'm not really qualified to discuss the political situation.
Back to top
View user's profile Send private message
steki47



Joined: 20 Apr 2008
Posts: 659
Location: BFE Inaka

PostPosted: Thu Jan 09, 2014 3:17 am    Post subject: Reply with quote

Pitarou wrote:
You paint quite an appealing picture. But I think the transition is going to be pretty ugly. In my most pessimistic moments, I see the pieces set out for a major war with China.

But that's just me scaremongering. I'm not really qualified to discuss the political situation.


I am hardly qualified to make economic predictions, but here I am. I am trying to be quasi-optimistic on the economic front. War with China sounds really ugly and it could poetentially mess up much of Asia.

This guy makes a few good points:

http://thediplomat.com/2013/02/7-reasons-china-and-japan-wont-go-to-war/?allpages=yes

Quote:

1. Beijing’s nightmare scenario. China might well win a war against Japan, but defeat would also be a very real possibility.
2. Economic interdependence.
3. Question marks over the PLA’s operational effectiveness.
4. Unsettled politics.
5. The unknown quantity of U.S. intervention.
6. China’s policy of avoiding military confrontation.
7. China’s socialization. China has spent too long telling the world that it poses no threat to peace to turn around and fulfill all the China-bashers’ prophecies.


I hope this guy is not being too optimistic.
Back to top
View user's profile Send private message
G Cthulhu



Joined: 07 Feb 2003
Posts: 1304
Location: Way, way off course.

PostPosted: Thu Jan 09, 2014 3:57 am    Post subject: Re: Will Japan go bankrupt? Reply with quote

rxk22 wrote:
I am curious, as there are a lot of doom and gloomers as well as 'it's 100% OK' articles out there. None of which, I think really truly cover Japan's situation well. Japan's govt is still in a massive spending deficit, something around 49% of the budget is made on bonds. Which is scary. On the other hand, the interest servicing of it are still pretty low. I was hoping that Abe(I know) would be able to kick the deficit, and pay down the debt before the population started to decrease, and the tax base with it. What is your outlook ,and you reasoning?


Japan is at less risk of going bankrupt than the US is. Far less likely. Japan has huge public and private assets around the world. It could literally liquidate for decades to cover debts even if it could "go bankrupt." The debt ratio is less than the US as well, so that's another positive. As for the declining population, everyone seems to forget that if demand goes up then so do wages: the economics are not a zero sum game. As the population declines then relative wages go up. The only question is how fast the rise against costs.
Back to top
View user's profile Send private message
Pitarou



Joined: 16 Nov 2009
Posts: 898
Location: Narita, Japan

PostPosted: Thu Jan 09, 2014 4:17 am    Post subject: Re: Will Japan go bankrupt? Reply with quote

G Cthulhu wrote:
Japan is at less risk of going bankrupt than the US is. Far less likely. Japan has huge public and private assets around the world. It could literally liquidate for decades to cover debts even if it could "go bankrupt." The debt ratio is less than the US as well, so that's another positive.


Like I said earlier, I've heard arguments like this before, and they never hold up when someone actually runs the numbers.

If memory serves (so apologies if I get this wrong):

Japanese gross debt: ~250% of GDP
Japanese net debt (i.e. after all assets are taken into account): ~150% of GDP

US gross debt: ~100% of GDP
Back to top
View user's profile Send private message
Display posts from previous:   
Post new topic   Reply to topic    Job Discussion Forums Forum Index -> Japan All times are GMT
Goto page 1, 2, 3  Next
Page 1 of 3

 
Jump to:  
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


This page is maintained by the one and only Dave Sperling.
Contact Dave's ESL Cafe
Copyright © 2011 Dave Sperling. All Rights Reserved.

Powered by phpBB © 2001, 2002 phpBB Group

Road2Spain - TEFL and Spanish with one year student visa
EBC