Abenomics: Japan's economic revolution will rock our world. BOJ blows big bubble say experts.; Japanese people have a bubble every 50 years. Once Japan does have a bubble they do it really big.
Tweet Topic Started: 22 Jan 2013, 12:01 PM (13,761 Views)
Imports (led by those unfortunate but necessary hydrocarbons) UP 11.9%
That is 8 straight months of trade deficits, longest streak since 1980.
Even worse, they are starting to run up current account deficits.
A debt/GDP ration that is quite sustainable when you have a current account surplus (you are lending to the rest of the world) becomes very destabilising as you build up a current account deficit.
Japan needs to turn its nukes back on ASAP or it will definitely end badly.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Abenomics 6 months in and the Japanese CPI -0.9%, Hmmmmmmm.
That 2% inflation target is looking like a pipedream.
The good news JPY is down around 30% Fuel prices are up by over the magical 2% figure The NIKKEI is up.
Inflation is showing up everywhere but the real economy!
The problem with the Japanese, the BOJ could give every citizen a pallet of Yen and they would hide it under the bed.
Cue the Keynsians, whatever it takes (is still not enough).
Yep - As I have said countless times here - QE is not inflationary. It is deflationary.
So no real surprises.
And so much for "debasement". The Yen is increasing in value relative to real goods and services.......yet the world thinks US QE will be different somehow,
miw
26 Apr 2013, 07:49 PM
Even worse, they are starting to run up current account deficits.
A debt/GDP ration that is quite sustainable when you have a current account surplus (you are lending to the rest of the world) becomes very destabilising as you build up a current account deficit.
Japan needs to turn its nukes back on ASAP or it will definitely end badly.
A current account deficit is the best outcome for Japan.
It means that the aging population is using its net financial assets (in yen) to acquire real goods and services from overseas. This is a much better outcome than buying them domestically against a shrinking workforce (which would be very inflationary).
By Stanley White and Kaori Kaneko TOKYO | Tue Apr 30, 2013 5:14am EDT
(Reuters) - Japan's household spending surged in March at the fastest pace in nine years in a sign that Prime Minister Shinzo Abe's bold efforts to end two decades of stagnation are lifting consumer confidence and setting the stage for an economic revival.
A recent run of data has provided encouraging early hope that Abe's push for aggressive fiscal and monetary policies to get the world's third-largest economy motoring is having the desired effect.
Separate data on Tuesday also showed the jobless rate fell to the lowest in more than four years, providing another piece of evidence that domestic demand could play a critical role in underwriting economic growth in coming months.
While Japan's industrial production rose less than expected in March due to tepid demand overseas, economists are confident that exports and factory output will eventually pick up due to a weaker yen.
On the whole, the figures suggest that expectations for Abe's combination of fiscal spending, monetary stimulus and structural reforms, known as "Abenomics," are having a positive impact on the household sector although the corporate sector is lagging behind.
"I expect the first quarter gross domestic product growth to exceed an annualized 2 percent, and if the corporate sector catches up with households, the pace of growth could accelerate," said Yoshiki Shinke, senior economist, Dai-Ichi Life Research Institute.
"Recovery in exports has been slow and so has industrial output, but as a weak yen is expected to impact shipments from now on, exports and factory output will pick up in coming months."
Abe's policy mix has so far driven the yen to a four-year low against the dollar and sparked a 50 percent rally in Japanese share prices from November, which has helped buoy consumer sentiment.
Confidence in Japan received another boost on April 4 when the Bank of Japan launched its radical monetary expansion campaign, promising to inject about $1.4 trillion into the economy in less than two years.
Household spending soared 5.2 percent in March from a year earlier in price-adjusted real terms, Ministry of Internal Affairs and Communications showed on Tuesday, as some individual investors cashed in on gains in stocks to increase spending on cars and home repairs.
That blew past the median estimate for a 1.8 percent annual increase and was the fastest gain since a 5.3 percent rise in the year to February 2004.
Such a big increase in spending is unlikely to be sustainable, and there are worries that wages have been slow to improve.
Economists have also warned in the past that the sample size for household spending is small and easily swayed by big ticket purchases.
Still, they expect consumer spending will continue to expand at a more reasonable pace as individual investors cash in on stock gains.
The seasonally adjusted unemployment rate fell to 4.1 percent in March, the lowest since 4.0 percent in November 2008, figures from the Internal Affairs ministry showed. That compared with economists' median forecast of 4.3 percent,
The jobs-to-applicants ratio was at 0.86, which matched the level seen in August 2008, separate data from the labor ministry showed.
One worrying sign was the slow uptick in industrial production, which rose a less-than-expected 0.2 percent in March, according to data from the Ministry of Economy, Trade and Industry.
Manufacturers surveyed by the ministry expect output to rise 0.8 percent in April and fall 0.3 percent in May, the data showed.
Japanese retail sales fell 0.3 percent in March from a year earlier, according to a separate release from the Ministry of Economy, Trade and Industry.
That was counter to the median estimate for a 0.6 percent annual increase, but economists say the data may not accurately reflect consumption, because it does not include spending on services.
Overall, policymakers will be encouraged by the improving mood among consumers. Data earlier this month showed Japanese consumer confidence rose in March to the highest level in almost six years, an important signal as Abe's policies rely heavily on expectations for future growth and prices.
Household spending is a crucial leg in reigniting growth, and in this respect Tuesday's data should come as a relief to BOJ Governor Haruhiko Kuroda as he aims to get the economy to generate 2 percent inflation in roughly two years.
Kuroda wants to raise inflation expectations in order to boost consumer spending and encourage capital consumption, leading to a virtuous circle that pushes consumer prices higher.
South Korea, as expected, is keen to go toe to toe with Japan.
Bloomberg
"Governor Kim Choong Soo and his board lowered the benchmark seven-day repurchase rate to 2.5 percent from 2.75 percent, the central bank said in a statement in Seoul today. Six of 20 economists surveyed by Bloomberg News predicted the move while the remainder forecast no change. Kim supported a cut after opposing one last month.
“Japan’s policies must have played a very big role in today’s decision,” said Huh Kwan, a Seoul-based fixed-income trader at Korea Investment & Securities Co., one of South Korea’s 20 primary dealers. “The cut can be seen as action to ease a worsening impact on exports.” Governor Kim Choong Soo and his board lowered the benchmark seven-day repurchase rate to 2.5 percent from 2.75 percent, the central bank said in a statement in Seoul today. Six of 20 economists surveyed by Bloomberg News predicted the move while the remainder forecast no change. Kim supported a cut after opposing one last month."
Currency trashing to continue, although if everyone does the same who wins?
Enjoy The Ride!
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"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
In a country where precision is expected in all aspects of life–trains arrive on time, shopkeepers hand you correct change–the government suffered quite an embarrassment admitting that it had left errors in one of, if not the most, important economic data for nearly three months.
The Cabinet Office said this week that there were errors in the gross domestic product data for the October-December quarter, first released in February then revised in March.
While it wasn’t mentioned in the Cabinet Office media release, officials confirmed that the error was first detected by a private-sector economist. Dai-ichi Life Research Institute chief economist Yoshiki Shinke published a report on Tuesday morning noting the error. The Cabinet Office corrected it later in the day.
The Cabinet Office said the nation’s nominal GDP during the period contracted by an annualized pace of 0.5% from the previous quarter, instead of the 1.3% shrinkage it previously reported. That was a result of an error in the trade deficit. The initial data had incorrectly reported a larger deficit.
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
JGB bond trading today halted limit down with yield rising 10bp to 70bp on the 10y. Bond Vigilantes?
Very interesting, if a little scary.
Here's what zero hedge have to say:
It appears things are getting a little out of control around the world. Between the collapse in JGB implied volatilities in recent days, today's melt-down in JPY (+255 pips from pre-open US levels), the last few days melt-up in the Nikkei (+6.8% in 3 days), and now the quadrillion Yen Japanese government bond market is halted limit down as yields smash higher by 11bps to 70bps in 10Y - the highest yield since mid-February. For context, this is the worst day in JGBs in five years (and 5Y yields are back near 13 month highs). So much for controlling the domestic bond market while ratcheting up inflation expectations.
There are those that say hyper inflation is always a currency event i.e. it is caused by a collapsing currency.
Personally, my take on the deflation vs inflation outlook is that we will have global deflation as long as bond prices keep going up but once bond prices start to crash we will switch into hyper inflation mode. The 'happy middle ground' they are looking to create will not materialise.
JGB bond trading today halted limit down with yield rising 10bp to 70bp on the 10y. Bond Vigilantes?
Mrs Watanabe more likely. Inflation was always going to collapse JGB prices. The government outlays 25% of revenues in interest payments on 60bp yield in the 10Y bond. In other words, roughly every 3 basis point rise in the 10Y yield is another 1% rise in interest payments.
If the 10Y yield rises to 2.4%, the government will be paying it's entire revenue base out in interest, at which point it will need to borrow more just to borrow more. Obviously this would shut the government down. To prevent this, the BoJ will have no choice but to directly monetise the bonds, destroying the savings of millions of Japanese retirees and causing massive inflation. No wonder the government recently proposed changing the constitution so they can suspend elections and impose martial law (sorry, emergency measures).
Mrs Watanabe more likely. Inflation was always going to collapse JGB prices. The government outlays 25% of revenues in interest payments on 60bp yield in the 10Y bond. In other words, roughly every 3 basis point rise in the 10Y yield is another 1% rise in interest payments.
If the 10Y yield rises to 2.4%, the government will be paying it's entire revenue base out in interest, at which point it will need to borrow more just to borrow more. Obviously this would shut the government down. To prevent this, the BoJ will have no choice but to directly monetise the bonds, destroying the savings of millions of Japanese retirees and causing massive inflation. No wonder the government recently proposed changing the constitution so they can suspend elections and impose martial law (sorry, emergency measures).
So the quadrillion dollar question is. What is Mrs Watanabe buying? USD, AUD, Gold?
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
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