BOJ launches negative rates, already dubbed a failure by markets

The requested article has expired, and is no longer available. Any related articles, and user comments are shown below.

  • 7

    klausdorth

    "The BOJ decided to introduce negative rates so suddenly without giving banks time to prepare for them,” said Keita Higano....."

    So "THEY" do it their way again. Well, our dear leader (and his buddies) must have some kind of joker in the back-pocket.

  • 10

    gogogo

    Japan Inc. is a failure, no one doing anything except helping themselves

  • 7

    JapaneseExperts

    I have talked to a few [ people ] about this and many of them tell me that they are no longer confident in terms of Abenomics and that they are no longer confident in the Japanese Governments ability to increase Japans economy for the better. Some tell me that they are planning to exchange their funds into US dollars or invest outside of Japan. Some say that in about two to three years, Japan will be somewhat like Greece. Not to sure, but things look bleak with regard to Japans economy and the BOJ is not helping. They are adding to the problem.

  • 10

    Disillusioned

    Abenomics is a paper tiger? I would have said, a pipe dream! Being up to your eyeballs in debt and keep on borrowing to cover it must be a failure! You don't have to be an economist to figure that one out. Sooner or later the money will run out. Japan's economic growth must come from within. The international markets Abe was relying on no longer exist for Japan. The car, electronics and manufacturing markets have all been taken over by other Asian countries. The boom days of Japan recycling foreign technologies and mass-producing them are over. Japan must innovate to recover, not recycle.

  • 7

    gaijinfo

    As soon as the regular Japanese on the street starts to exchange Yen for Dollars, it's all over. Up until now the average J-Citizen obediently held onto J-Bonds, but once the exodus starts, it's all over. Absolutely nothing you can do. Savers will be crucified. Retirees depending on a pension will literally starve. Suicides will increase.

    THE ONLY thing they can do is "sacrifice" some parts of the economy to save most of the people. If they bail on their overprotective tarrifs, and let people buy imports for cheap, then some people might have a chance.

  • 1

    kobejim

    The central banks know China has an uphill battle in stopping (slowing) the devaluation of the yuan. Likely, The BOJ are doing this in order to prevent even more dramatic rise in yen value. In order to prop up the yuan, China largely sells dollars which keeps dollars relatively flat, leaving the euro and yen as the remaining safe haven currencies with likely better valuation. There is no real great decision to make here for the BOJ or Abe. Sometimes you get the bear and sometimes, he gets you!

  • 11

    sangetsu03

    So, Japan has devalued the yen to cause savers to spend, and negative rates so banks will do the same. In other words "use it, or lose it". This amounts to confiscation of the value of people's wages and savings, and the assets and deposits held in private banks. And all this to try to solve a problem which the government itself created.

    If the banks had a place to invest their money and earn a return, they would do so. But with the cost of living already outrageous, people losing more of their money though ever increasing taxes and devaluation of their spending money, and a quickly shrinking population causing a direct decrease in the consumption of goods and services, where and what should banks invest in? Should they risk their depositor's money (the money banks possess is not their own) on investments which they know cannot provide a return?

    So the government wants the people and the banks to pay for the government's mismanagement of the economy. It hardly seems fair, does it? Abe promised that he would deregulate and reform the economy, and no bank or any other investor should invest one single yen in anything until Abe keeps that promise. If he is unwilling or unable to do so, the market will take matters into it's own hands, with the predictable catastrophic results, and Abe's name will go down in history as one of Japan's greatest failures.

  • 5

    some14some

    i am more concerned about individual customers who will not doubt suffer from negative interest rates also commercial banks will definitely increase "tesuryo" (commission/charges) very shortly.

  • -10

    nakanoguy01

    As soon as the regular Japanese on the street starts to exchange Yen for Dollars, it's all over.

    i'm flummoxed as to why japanese people would ever do this? they live in Japan so exchanging to dollars would serve what purpose?

  • -14

    Futaro Gamagori

    wow so many smart people here seems like you all know what needs to be done

  • 5

    fxgai

    Banks are facing all sorts of heavy new regulations these days to make sure they are ultra-safe; the BOJ pushing interest rates negative to try to encourage more lending is like spitting into a strong wind.

    Savers are already getting virtually no interest; making that virtually zero amount of interest even closer to zero doesn't mean people are suddenly going to want to risk losing 5%, 10%, 50% or 100% of their money on some investment, if they weren't prepared to do so already.

    To buy a house, as a borrower you still have to prove to a lender that you are likely to be able to pay the money back, so this policy might help rich people buy a slightly bigger / better house, but I don't see it means much for those who can't get past the initial hurdle.

    It's the government that needs to help make the economic environment more conducive to loan demand and growth. Interest rates are not the sole determinant of how much risk people take - regulations play a massive part too, but this for some reason is not the focal point of today's debate.

  • 1

    Reckless

    layman terms: -demand for loans is falling because of falling population and higher taxes -less demand means I don't want a loan for any reason (maybe could get a huge loan and just skip off to costa rica FOREVER) -prices will have to keep falling in deflation for a very long time or until WAR which will spike demand

  • 4

    shonanbb

    If they make me pay to keep my money in them, then I take it all out.

  • 9

    Reckless

    Abe-san is probably happy as a lark. I presume he owns stocks and made a bundle selling at the top along with his buddies.

    My proposal to save Japan: 1. Increase foreign direct investment by making first year tax free for new foreign investment gains 2. Government taking of abandoned homes and demolished and land given tax free to young families to build a low interest loan home 3. Sell off government assets over time 4. FTA with China and Korea to supercharge trade

    Thanks.

  • -1

    5petals

    but is this a time to get into forex? are people making allot doing it with the swings we see from 110 to 114?

  • 1

    Triring

    shonanbb

    Many European private banks actually does that. Minus interest by the main bank was initiated in Switzerland sometime ago to lower the Swiss Franc with some results.

  • -3

    5petals

    @reckless

    Your idea would also work in other countries. If the U.S. would buy depressed land and areas and offer corporations rent free, tax free or some other short term incentive, if they in turn agreed to hire vets ex felons and unemployed who had completed an extensive probation, and continued probation in that zone designated for them, it would turn all of mess around. Right now, its the goverments in the way. Its all but impossible to open a business in some sectors. Its impossible for some sectors of the population to find good work. Its not progressive engineering or creative solutions, it just continued schemes to promote one class and keep the others enslaved to them. If the governments got their hands off the peoples money and let/help them start businesses in every way possible, then growth would start.

  • 10

    mataka

    Oh dear. What a mess. I think the first action that needs to be taken is to get rid of Taro Aso who is responsible for the economy. He has been televised sleeping during important debates and Diet sessions recently. He is universally despised by Japanese and has proved himself on numerous occasions to be vulgar, wholly incompetent and hypocritical (he said in public several years ago that old people should "hurry up and die" - he is 75 years old so he would do well to take his own advice sooner rather than later). With such despicable and useless people at the helm, Japan has no chance of moving forward. The country faces many difficult challenges - the relatively excellent health and welfare system is close to breaking point and absolutely nothing is being done about it. Some experts conclude it is already too late to save it. The country will remain an economics textbook basket case and risk becoming a laughing stock with such dinosaurs in charge. Without a change of leaders who are competent and capable of bringing real change, who look to the future and, not the past, our children cannot live the life nor get the opportunities they deserve.

  • 4

    some14some

    If they make me pay to keep my money in them, then I take it all out.

    still they may charge you, why? for maintaining account with them (!) can afford to close down account ? if yes, what about your credit card? will return and stop online shopping etc..? In short, there is no escape for hard working honest people like us :)

  • 1

    fxgai

    i'm flummoxed as to why japanese people would ever do this? they live in Japan so exchanging to dollars would serve what purpose?

    So long as they don't want to buy anything from overseas (like corn, wheat, coffee beans, oil, natural gas, metals, etc) or locally produced products derived from such things, then yes they should be fine with yen.

    But those who do want to buy stuff originating from overseas may come to the realization that they would be somewhat hedging themselves against the inflation that the Japanese authorities so desperately want to generate, by holding some dollars.

  • -3

    nakanoguy01

    So long as they don't want to buy anything from overseas (like corn, wheat, coffee beans, oil, natural gas, metals, etc) or locally produced products derived from such things, then yes they should be fine with yen.

    but why would the average japanese person need to convert yen to dollars in order to buy these goods? they can just use yen at the local supermarket or conbini. trading companies need to exchange yen for dollars or other currencies. so much for being a fxgai.

  • 3

    sf2k

    won't people just cash out and put it in the mattress so to speak?

  • 1

    Kobe White Bar Owner

    @Nakanoguy

    Back to sleep mate.

  • -5

    JeffLee

    "Nakanoguy -- Back to sleep mate."

    It's the people replying to his posts who are "asleep." Why not just answer his question: What exactly can Japanese consumers buy with US dollars in Japan?

  • 3

    fxgai

    nakanoguy,

    but why would the average japanese person need to convert yen to dollars in order to buy these goods? ... trading companies need to exchange yen for dollars or other currencies.

    Yes but you are missing the key point, which is that inflation in Japanese yen means that over time the relative value of the yen will go down.

    When trading companies find they need to stump up with more yen to obtain the same amount of dollars, they pass at least some of that cost onto consumers. (This has already happened in a range of Japanese consumer products since Abenomics started, but oil prices crashing has foiled plans to get the overall CPI to 2%.)

    But those average Japanese who stocked up on dollars in advance can use those dollars to offset the increases in the yen prices they pay.

    If one believes that the authorities will miraculously be able to stop the inflation at 2%, despite having so much difficulty in getting it to the target in the first place, one might opt to just suck it up. Skeptics who think that the authorities could overshoot (and they probably want to in order to bring down the real value of the public debt burden) might err on the side of caution.

  • 4

    ThonTaddeo

    It's the people replying to his posts who are "asleep." Why not just answer his question: What exactly can Japanese consumers buy with US dollars in Japan?

    A lot more than they can buy with yen, if they keep their savings in dollars and then withdraw and change back to yen only when making big purchases.

    Someone with 10 million yen in 2010-2012 would have gotten $130,000 for it then. That $130,000 now buys nearly 15 million yen today, even if no interest had been earned on that savings account. Knowing in advance just how brutal the LDP/BOJ/Abe devaluation was going to be would have kept you entirely insulated from the depredations of the past 3 1/2 years.

  • 1

    takeda.shingen.1991@gmail.com

    It's the people replying to his posts who are "asleep." Why not just answer his question: What exactly can Japanese consumers buy with US dollars in Japan?

    Japan is, what, only 40% food self-sufficient? The average Japanese consumer might not buy anything in dollars directly, but the stores and the trade companies which provide food products to individual consumers certainly bought the goods with dollars.

  • 4

    chomskyite

    Print Kuroda , Print. When the Nikkei rockets again while world markets continue to slide sideways and downwards eventually enough Japanese people will see the facade and pull the curtain.

  • -1

    shonanbb

    SF2K: You mean under the Futon. Sure will get bumpy with all my cash. I am soooooo rich. :-)

  • 0

    kurisupisu

    The yen is on a downward trend-the BOJ is all out to achieve it and when oil starts to go back up then Kuroda will see his 2% figure come true. Already 24k gold is over 4500yen a gram- this is one indication that peoe are loosing faith in the yen...

  • 1

    fxgai

    ThonTaddeo,

    Knowing in advance just how brutal the LDP/BOJ/Abe devaluation was going to be would have kept you entirely insulated from the depredations of the past 3 1/2 years.

    Yes. Unfairly (IMO) the government regards foreign exchange "profits" made from such self-preservation driven dumping of yen as taxable, so those who properly pay taxes still lose a good fraction.

  • 1

    Kobe White Bar Owner

    @ Jeff Lee

    Basically, dont put all ya eggs in 1 basket.

  • 3

    smithinjapan

    Good old Kuroda and the BOJ -- "never my fault!". Last week when it was announced the yen was going up and stocks diving Abe said he "stands behind his buddy Kuroda". This week he's sure not talking much, and definitely not mentioning Abenomics.

    I sure can't wait till they try and stop mentioning that name forever associated with him and pointing out a few of his many failures, but it will be brought up heretofore in every election, and every supporter, who will quickly try to play it down and change the name/topic to something else. hahaha.

  • -1

    sangetsu03

    i'm flummoxed as to why japanese people would ever do this? they live in Japan so exchanging to dollars would serve what purpose?

    In the new a few weeks ago there was a story about shops saying they would accept US dollars, as Japanese travelers often come home with unspent money, and don't exchange it back into yen. Quite a few people I know cashed in dollars they had accumulated when the exchange rate hit 125 yen to the dollar. In other countries the dollar is the standard currency when the national currency is debauched and devalued by their governments. You will find it easy to use dollars throughout the third world. A few US dollars are worth a few hundred trillion Zimbabwe dollars, and yes, in Zimbabwe people have had to wheel around their nearly worthless national currency in carts, as the amount necessary to buy a loaf of bread is too heavy to carry in one's arms.

    And developed countries are now doing exactly what Zimbabwe has been doing, printing money to pay their bills.

  • 2

    Frederic Bastiat

    It's the Stupid leading the Blind. Not going to end well, folks.

  • 1

    seadog538

    Economists (whatever they are.) and financial experts all have one thing in common---they don't really know what they are doing. To make things worse, they are all full of the stuff that makes the grass grow tall in Texas----and many believe them!

  • 4

    fxgai

    Zimbabwe dollars were decommissioned last year, but they aren't completely worthless.

    One Hundred Trillion Dollars can be yours for $45! http://zimbabwedollars.net/collections/all

  • 0

    sangetsu03

    One Hundred Trillion Dollars can be yours for $45!

    Hmm, I guess I got a good deal on my 100 trillion dollar note, it cost me $1, I suppose I should sell it. If the exchange rate hits $50 per 100 trillion, maybe Zimbabwe will re-commission their currency. Kuroda should go to Zimbabwe to learn how to create inflation; he can't hit the 2% after two years of trying, Zimbabwe managed to create an inflation rate of 3.5 million precent, per month!

  • -3

    ghoneim mohamed

    Abe Shinzo never a paper tiger,nor BOJ passive interest responsible for Nikei loss,it was just a trigger speculators needed to put this scenario into action,according to TECHNICAL ANALYSIS of yen,it showed clearly its going up against dollar,even to 100 yen against dollar,nothing new,no surprise.The same with Nikei,and also all stock markets are affected by DOW JONES.All what speculators want always is just a reason to pull trigger,that what happened when BOJ announced negative interest.Those who blames Abe Shinzo for QE they should remember States is the pioneer of this policy as we saw several times,meanwhile its a tool to be used as a must in certain conditions as well known.If people have a look on TECHNICAL ANALYSIS of yen and Nikei they have better understanding to whats happens,away from Abenomics complex.As i technically analyzed yen and Nikei before,here we can see Nikei couldt go further than minor resistance 16029(closed16059)couldnt break 16152,this means down again,Yen couldnt break resistance level of 114.7,and stay above,this means down to 110 then 106.63.

  • 2

    anotherexpat

    This would be funny if the implications weren't so tragic. After putting our pensions in the market to prop it up, Abe's absurd, ridiculous economic policies tank the markets. Why is he still in office?

  • 0

    BertieWooster

    anotherexpat,

    Why is he (Abe) still in office?

    Why indeed?

    He is mentally unstable.

    A dead loss as a diplomat.

    And hasn't a clue about finance or economics.

    If he applied for jobs in the "Real World" no one would employ him.

  • 3

    sangetsu03

    Those who blames Abe Shinzo for QE they should remember States is the pioneer of this policy as we saw several times.

    You cannot compare Japan and America. America is an immensely wealthy country, which is rich in agriculture, energy, and raw materials. In addition to these, America's population is still growing strongly. If there is one country in the world were Keynesian economics might work, it would be America.

    On the other hand, Japan is poor in agriculture, energy, and materials, and Japan's population is falling rapidly. A country can only borrow, pump, and deficit-spend when there is the potential for growth to pay for these policies. In Japan there is no such potential. And even if the two countries were equals, should one of them jump off a cliff just because another one did?

  • 0

    mr_jgb

    Negative rates was a tactical mistake. BOJ should concentrate on buying ETF and help spur the housing market especially to foreigners, facilitating their purchases by easier loans and ease in opening banking accounts.

    MOF should focus on how to get the Yen weaker.

    While the Japanese government focus on attracting more Chinese tourists from China and other parts of Asia. These are the "big spenders" boosting consumption, retail sales and housing investments in Japan. PM Abe and his politicians should adopt a more friendly attitude.

    20 million tourists a year is way to low compare to Japan's tourism potential. 100 million tourists can be a viable target. Tourists' spending is a solid viable pillar to ease Japanese weak domestic demand and investments.

  • 1

    kurisupisu

    But then the Japanese would need to speak English or more pertinently Chinese which they seem not to be able to do-hell! The average Nepali waiter here speaks better English than most Of the natives here.....

  • 0

    ghoneim mohamed

    Sangetsu03 Am not comparing,am just illustrating that QE is a tool,sometimes there is no option but to use it,though its has side affects.Europe also used it for years after 2008,Japan is not an exception.Abe Shinzo is not that bad as people show,such complicated economic policies and issues cant be taken in this simple way many people take it.Stockmarkets worldwide uncertainty,instability,speculations,etc all are mixed hard to separate or judge on each away from others its Domino pieces.No one can deny what happen now is mere speculation from oil to currencies.

  • 0

    Jandworld

    You grow and you think positive, you shrink and well, lets go down a bit .

    Anyways there is too much of everything, so a bit less of activity might help nature.

    Anyone here can think that bamboo is better then steel?

  • 1

    fxgai

    Another expat,

    Don't worry it's not like Japan's pension system was sustainable anyway. Just plan on looking after yourself and you'll be fine.

    I don't think it's fair to blame the market tanking recently on Abe, it would be tanking anyway, just less if he had done a better job of revitalizing Japan's business environment.

  • -1

    wildwest

    I feel sorry for "TAKANKA SAN" he gets told by Kuroda to get his yen out of the bank because of -interest rates and borrow more to invest in the stock market only to have its value fall by 30%. What has Mr Abe got planed next I wonder?

  • 0

    bruinfan

    @Reckless

    I like your ideas. I would like to add: (5) Raise the general government pension age to 68.

  • 2

    Simon Foston

    ghoneim mohamedFEB. 16, 2016 - 08:31PM JST

    Abe Shinzo is not that bad as people show

    Sorry, but yes he is. He talks big about changing everything for the better, but his only goal is keeping the LDP in power and that largely involves appeasing powerful vested interests groups who like everything just the way it is. I suspect he was hoping the first two "arrows" would sort out all the problems so that there would be no need for a third one, but now that it hasn't turned out that way it's clear he won't dare upset the status quo with anything all the grandads in the koenkai might not like.

  • -1

    AstoBoy

    No matter what Japanese government and BOJ do, Japnese economy won't change. Even if they do what American top economists, it won't change.

  • 1

    Farmboy

    Whether or not negative rates are a good idea, it's important to understand that this is NOT a charge that local banks make on loans to customers.

  • -2

    tinawatanabe

    What has Mr Abe got planed next I wonder?

    The negative interest rate is ideal for issuing long term JGB.

  • 0

    Farmboy

    And it's NOT a charge that local banks make on the deposits of customers, in case that isn't clear.

  • 1

    sangetsu03

    Sangetsu03 Am not comparing,am just illustrating that QE is a tool,sometimes there is no option but to use it,though its has side affects.Europe also used it for years after 2008,Japan is not an exception.Abe Shinzo is not that bad as people show,such complicated economic policies and issues cant be taken in this simple way many people take it.Stockmarkets worldwide uncertainty,instability,speculations,etc all are mixed hard to separate or judge on each away from others its Domino pieces.No one can deny what happen now is mere speculation from oil to currencies.

    QE and other intervention is not the result of failure in the private marketplace, but the consequences of trying to control the marketplace. Since the 60's Japan has closed it's markets to outside competition, manipulated it's currency, formulated a voting system where a minority of the voters gets the majority of the votes, and then allowed politicians to buy these votes and finance the bill by taxing the more productive parts of the economy. It has allowed the practice of amakudari in which politicians and big business people can collude to fix prices with impunity, and set up large conglomerates which own the lion's share of the economy. Another effect of this close business/government relationship is that these businesses get the majority of the money spent for infrastructure projects, and in return, the financial arms of these conglomerates buy up the majority of government bonds. This allows most of Japan's sovereign debt to be domestically held, but this is a bad thing, because it allows rates to be manipulated (JGB's yields have always "defied gravity"), and also allows the government to borrow more than it safely should.

    All of this has resulted in an overpriced and uncompetitive (and deeply indebted) economy, which has both put downward pressure on the population, and created deflationary conditions. And Japan is not alone in this foolishness, though it has taken protectionism and market manipulation to higher levels than other developed countries.

    The problems the world's economies are facing now is not the result of lack of government action or intervention, but the consequences of too much government action and intervention. Left alone, the market, and the people themselves are quite capable of taking care of themselves, and enjoying a fair amount of personal success. But big government big business don't care about what is fair. Big businesses want a market where they don't have to compete, and government is all too happy to bend over for them, so long as they pay them enough for enacting protective laws and regulations.

    Further easing, interest rate cuts, and spending will not help, they could never have helped to begin with, because Japan's decline is not caused by a tight money supply, unnaturally high interest rates, or in need of the spending projects the government has enacted. So none of these interventions can possibly help, in fact, they make things only worse. Japan's main problem is demographics, and the cause of the demographic problem is a high cost of living, and the high cost of living is the result of an overly-protected on uncompetitive economy.

    The first two arrows of Abenomics were not necessary at all. The only arrow needed is the one which apparently will never be used. But the first two arrows have enriched many politicians, and filled the coffers of Japan Inc. More QE might buy a few more months of prosperity for the stock market and Japan Inc, but the market will not be defied, and future generations will pay for our current prosperity by having less of their own.

  • 0

    ThePBot

    21 arrows and counting.

  • 1

    jrk33

    Invest into gold and silver

  • 0

    ghoneim mohamed

    Sangetsu03 Demographic problem facing Japan is not mainly because of high cost of living,its a life style every where in developed countries nowadays-Japan among-in Europe and Scandinavian countries even worse,while they dont have this problem.Yes they solve by accepting migrants to compensate,but concerning this point definitely Japan is very cautious-also south Korea-and i can understand their reasons,meanwhile it can be done by selective controlled migration-such as in Canada,and Australia.but again its a special sensitive case for Japanese,its understandable. Still i dont see Japan economy in danger,i dont consider this economic worldwide chaos is something dangerous,simply because itwill be a beginning of big changes and new economic world order,this is just transitional period.I dont know how long will it take,but for sure not so long.A beginning will be if Sanders win American presidency-i fully wish him to win-the real effective reforms should begin with and in WALL STREET.

  • 1

    JeffLee

    "Those who blames Abe Shinzo for QE they should remember States is the pioneer of this policy as we saw several times."

    Wrong! The Japanese invented QE, and were the first to use it several years after the 1992 bubble burst, at a time when no one in the US knew what it was.

  • 3

    John-San

    Middle class Japan is falling back into lower class. Is not that the lower class has improve. It is totally opposite. My Partner and I are waiting on the Sub contract decision and If Japan miss out, we are moving back to Australia. I can see Japan women,s work force paying the price for Japan declining economy. This is were the Companies will aim to cut costs. They know women have poor outcome trying to be pay and received as equal in Japan. And i can see it stopping at women. I can see the middle class will be next on the block after the female work force with declining living standards

  • 0

    5petals

    "Left alone, the market, and the people themselves are quite capable of taking care of themselves, and enjoying a fair amount of personal success. But big government big business don't care about what is fair. Big businesses want a market where they don't have to compete, and government is all too happy to bend over for them, so long as they pay them enough for enacting protective laws and regulations."

    This is spot on. If the government would do everything it could to promote small business instead of getting in the way with protectionism, bribes, fines regulations and other crap, the economy would take care of itself. What sangetsu posted gets to the real. I personally think there is another more disturbing dynamic in Japan that keeps it all from ever getting better and thats the culture of blind obedience and group think. This combined with what sangetsu mentioned will make it all but impossible for Japan to escape terminal decline, IMO.

    "Still i dont see Japan economy in danger,i dont consider this economic worldwide chaos is something dangerous,simply because itwill be a beginning of big changes and new economic world order,this is just transitional period.I dont know how long will it take,but for sure not so long"

    Thats because you still havent opened to your eyes of whats really going on. Yes, maybe for India and China, who are both going through major restructuring and now India has become a consumption based market economy and is on track to take Japans place. China just changed their one child policy to two, and are shifting from an export to domestic economy. Just look at how Japan dragged on with the TPP, and what changes have come from it? I havent seen a damn thing. Its back into the loop, as sangetsu mentions, of helping those who dont need it and screwing those who do.

  • 1

    John-San

    Yes SPETALS; China and India have both seen a rise in living standards. In another term, Wages have risen. This means people spending more on living. Japan economy has been stagnate for the same time the minimum wage has been stagnate. For the middle class the real term of living standard have drop. The price of their property Homes an Holiday home has stay stagnate where say their counterpart in Canada, Europe and Australia has increase at over 10%. Unless middle class invested in the ShareMarket one would be better of then the middle class person did not. Middle class invest more is property. Well the wealthy, what can I say. We all see them buy the latest car. I have not seen a luxury car maker go busts for decades or a decease in personal Jet orders. Rich people get rich in Japan. I know nothing about arrows but I know Japan time has come to bite the bullet and rise the minimum wage by 50%. then 10% more each year for 5 years. Give small business some help like paying there employee pension for those earning under Y1500 an hour. then prorater up to Y2000 an hour. Over Y2000 the company start paying full. Japan really has to invest in it people. Plus these classes have to start demanding a better deal. like the above post mention.

  • 0

    sangetsu03

    Demographic problem facing Japan is not mainly because of high cost of living,its a life style every where in developed countries nowadays

    The cost of living is indeed the cause, but not alone. The other factor is the education level. In Japan and many developed countries, an educated person can easily look at their income, their expenses, and the cost of raising children. Many find the cost too high, and such is the case in Japan. In addition to this, the people know their government is swimming in debt, that wages are stagnant, and that the Japan of the future will have less to offer than the Japan of the past. Not exactly a positive environment for bringing up children.

    In developing countries, the education level is abysmal, and people often act without much forethought about the consequences of their actions. They have many children, whether they can afford to or not.

    How much does it cost to have a child in Japan? How much for clothes, food, eduction, etc? How much have these costs risen over the years? Food in Japan costs twice as much as in Europe, and nearly three times as much as America. When I went to look at the various "bargain sales" at the retail stores last month, I bought nothing, because the "sale" prices were as much as double what the normal retail prices are in America or Europe for the same goods.

    Scandinavian countries have a few of the same concerns about Japan. But unlike Japan, when they see their economies heading south, they are able to enact substantial changes to their economies. These countries also have another difference from Japan, when they issue debt, it is sold on the international market place, meaning that the yields they pay are not decided by a small cabal of bureaucrats and financial executives, but by the market itself. Though public spending is high, it is managed better than in Japan, because if such were not the case, no one would buy their bonds.

    I know nothing about arrows but I know Japan time has come to bite the bullet and rise the minimum wage by 50%. then 10% more each year for 5 years.

    Utter stupidity. If the minimum wage is raised by 50%, unemployment will rise a like amount. And the more the wage is raised, the fewer people will be employed. I guess you are unaware that Japan's economy is driven primarily by domestic consumption, and that most Japanese businesses are not very profitable. Indeed, some 70% reported a loss last year.

    The population will drop by one-third by 2050. That means Japanese businesses can expect domestic consumption to drop by one-third as well. How can they raise wages by any amount when the demographic trend is deflationary? The market is trying to compensate for demography by bringing down both prices and wages, which is natural when consumption decreases. Deflation occurs until prices reach what people can afford to pay, and wages reaches levels that businesses can afford to pay. Then growth begins again.

    But unfortunately, with a national debt of more than 1000 trillion yen, any deflation added to the weight of that debt, and debt servicing costs. The government is less trying to jumpstart the economy by increasing inflation, but to create an artificial economic environment where the can continue to borrow and spend our money.

    The economic problems we are facing are all the result of widespread greed. Greed of the politicians to generate graft and jobs for their friends and families, greed of the companies which don't want to compete head-to-head with foreign companies, and greed of the people who allow their votes to be bought with promises of subsidies which cannot be paid for. Greed in the free market is a good thing, greed in government is not.

  • 0

    John-San

    Sangetue: You do realise that the minimum wage in Japan is Y600 per hour and they pay their own pension. I can not see how lifting to Y900. and by 2020 Y1200 pre hour would make Japan worst. In Australia a person on the minimum wage receives About $15 USD. and their super annualation is 10% per hour paid extra by the Employer or the Company. This was adopted in 1985 by work law and unemployment was at 12% . 1985 the minimum wage in Australia was about $3.00 USD. fast forward 30 years. Australia is in top 15 economy in the world with a population of 24 million the entire work force can look forward to a good super and unemployment is 5.5%. That is opposite to what you predict. You have to invest in your own people.it builds and drive productivity and with Japan protectionism they should achieve what Australia has accomplish with a open market in half the time.

  • 0

    fxgai

    I don't think Australia's economic success can be put down to its hiking of the minimum wage in the 80's.

    They have had a fantastic economy in recent years thanks largely to strong demand for their commodity exports, as China grew rapidly.

    Yet Australia might have turned out even better without the minimum wage hikes you mention.

    We don't know.

    But we do know that someone has to pay for higher wages, and it's not Santa Claus. I've friends who just came back from an Australian holiday and they were complaining about how expensive stuff was there (although they enjoyed it overall).

    You have to invest in your own people.

    Paying people more, in exchange for no extra value, is not investing though. A minimum wage hike doesn't address productivity at all, it's just government interference in labour market pricing.

    The best thing for people earning the minimum wage is for them to obtain more skills, for their own personal benefit. Government investing in that would be OK, for example through training programs or more effective education.

  • -1

    wipeout

    @sangetsu

    You cannot compare Japan and America. America is an immensely wealthy country, which is rich in agriculture, energy, and raw materials.

    A reasonably fair point.

    Yet a few comments earlier, you managed this piece of masterful sidetracking:

    In the news a few weeks ago there was a story about shops saying they would accept US dollars, as Japanese travelers often come home with unspent money, and don't exchange it back into yen. Quite a few people I know cashed in dollars they had accumulated when the exchange rate hit 125 yen to the dollar. In other countries the dollar is the standard currency when the national currency is debauched and devalued by their governments. You will find it easy to use dollars throughout the third world. A few US dollars are worth a few hundred trillion Zimbabwe dollars, and yes, in Zimbabwe people have had to wheel around their nearly worthless national currency in carts, as the amount necessary to buy a loaf of bread is too heavy to carry in one's arms.

    No comparison between Japan and America, and yet no shortage of comments from you drawing parallels between Japan and (FFS) Greece, and here, Zimbabwe.

  • 3

    cleo

    the minimum wage in Japan is Y600 per hour and they pay their own pension.

    The minimum wage differs by prefecture, from a low of ¥693 in Okinawa, Miyazaki and Kochi to a high of ¥907 in Tokyo, averaging out at ¥730.

    http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/koyou_roudou/roudoukijun/minimumichiran/

  • -2

    tinawatanabe

    The population will drop by one-third by 2050.

    if the govt did nothing for the next 35 years, which is unlikely. You keep mentioning the population drop, but the people who are dying are mostly the old people including the baby boomers.

  • -1

    sangetsu03

    No comparison between Japan and America, and yet no shortage of comments from you drawing parallels between Japan and (FFS) Greece, and here, Zimbabwe.

    I disagree with what America is doing as much as I disagree with what other developed countries are doing, and that is robbing current and future taxpayers to pay for government mismanagement of national economies. Developed countries are enacting economic policies once only found in the third world, that is, to increase regulation of their economies, and print money to pay their bills.

    I can not see how lifting to Y900. and by 2020 Y1200 pre hour would make Japan worst

    When you reward the unskilled and uneducated with higher wages, you discourage them from bothering to learn skills or acquire and education. And when you increase the numbers of unskilled and educated people in the economy, what good does that do for the country? And another thing. When you raise minimum wages, two things happen. First, since most companies operate on thin margins as it is, they must cut headcount, and second, raise prices to compensate for the wage increase. In the long run, the cost of living adjusts upward (the market at work), and eventually the higher minimum wage buys no more than the lower one did.

    At the worst, raising the minimum wage will increase unemployment, put companies which are already on the edge out of business, and increase the prices we spend for goods and services. And raising the minimum wage will put pressure on the middle class, which is the largest consumer of the goods and services which minimum wage earners provide.

  • 2

    wipeout

    Developed countries are enacting economic policies once only found in the third world, that is, to increase regulation of their economies, and print money to pay their bills.

    Really, the moment you bring Zimbabwe into the discussion, you simply underline that you have nothing worthwhile to say.

    Zimbabwe produces practically nothing that it can export other than minerals - which have never been a solid guarantee of national wealth for any country, and certainly not African countries - it has an indifferently educated and skilled population (compared to, say, Japan), and it is beset by the kind of problems that developed countries will never have to consider: an HIV infection rate of 15 percent, infant mortality over 10 percent, endemic extreme poverty. Plus ethnic conflict and an autocratic government that has set the course of development backwards for the last 35 years.

    There is nothing in Zimbabwe's history as a nation - including its monetary policy or inflation history - that is instructive to an industrialized, advanced country like Japan, the United States, Germany, or Australia. It simply doesn't belong in the discussion.

  • 1

    John-San

    Y1200 is not a high wage. it is dismally low. Do you live in the real world. 900 x 50 = Y45,000 before tax and pension, and you have live in Toyko, How can a person pay to advance their education on that Y674 per hour. On a decent wage the person could. You seem to think being unskill and uneducated is some sort of terminal decease. What the Min wage now, It does not allow for any incentive to better oneself. That is a common goal in all humans and to say that the lower classes are void of improving themselves is awful way to think of your follow worker ( the person serving you at 7/11 ).

  • 1

    Strangerland

    I agree with John.

    When you reward the unskilled and uneducated with higher wages, you discourage them from bothering to learn skills or acquire and education.

    And when you keep the wages of the unskilled and uneducated way below the poverty level, they have no way of being able to learn new skills or being able to acquire an education.

  • -2

    tinawatanabe

    When you reward the unskilled and uneducated with higher wages, you discourage them from bothering to learn skills or acquire and education.

    I know many of them with lower wages are college graduates. It is whether regular workers or temps that decides your wages, not your education.

  • -1

    fxgai

    Sangetsu is right - Incentives matter.

    If people get something for nothing, that takes away one of the incentives to work harder or get smarter.

    If I could have become a millionaire just by delivering pamphlets or scanning barcodes at the supermarket, as I did to earn pocket money when I was a kid, there's no way I would have wasted time learning more valuable skills.

    Look, if the issue is that people can't afford an education by working a minimum wage job, the answer is to support better education or training for youth of little means and no family support.

    Bumping the minimum wage would be a very blunt instrument, and would price kids just wanting to earn pocket money out of the marketplace, and deny them that first opportunity to learn the value of work, begin building their work history. That's going to hurt them, not help them, in the long run.

    Such negative consequences to bumping the minimum wage should not be overlooked.

    wipeout,

    If you don't like Zimbabwe, think advanced, industrialized Germany's former Weimar republic instead then.

    With Japan's aging shrinking workforce, and stale old companies failing like Sharp and Toshiba, the trajectory Japan is following doesn't look good, especially if the government continues to spend 30 to 40 trillion yen in excess of tax revenues every year. Japan itself has experienced high inflation in the past. Japan has a bad history of waiting for a crisis before making necessary changes.

  • -3

    tinawatanabe

    If I could have become a millionaire just by delivering pamphlets or scanning barcodes at the supermarket

    Nobody is talking about making low wage workers millionaires.

    With Japan's aging shrinking workforce, and stale old companies failing like Sharp and Toshiba, the trajectory Japan is following doesn't look good

    Some stale old companies among thousands of listed companies do not tell the trajectory Japan is following.

    If you don't like Zimbabwe, think advanced, industrialized Germany's former Weimar republic instead then.

    Zimbabwe simply printed money without taking security. What is the similarity with Weimar republic? JGB is selling well and the Japanese are main buyers.

  • 0

    John-San

    how would it price young people out, then it the minimum ? either way you hire a old farmer wife or the a young uni student it is still the minimum even if you kept the same or lifted. In the future or now I can not see the rich changing their spending habits if the minimum wage is lifted. But i can the lower class spending more on every day items like heating, buying a new book instead of a used one or maybe buy a scooter, This is the sort of spend Japan needs. Instead the rich want to deny the lowers class affordable heating and all those little items so they can get mega rich and still will not change their spending habits.

  • -2

    fxgai

    Nobody is talking about making low wage workers millionaires.

    Why not? Just raise the minimum wage high enough. Everyone can be a millionaire that way, right?

    JGB is selling well and the Japanese are main buyers.

    JGBs are selling well as the BOJ is buying enough to increase the monetary base by 80 trillion yen extra a year. Central bank directly buying JGBs was banned in Japan after it's previous failed experiments, this time they are doing the same but buying from the secondary market rather than directly. Fingers crossed that that will prove to be the difference!

    how would it price young people out, then it the minimum ? either way you hire a old farmer wife or the a young uni student it is still the minimum even if you kept the same or lifted.

    But people have to pay for that. And if fewer people are prepared to pay for it, jobs are either lost completely or automated, denying those workers their option to take such a job.

    the rich want to deny the lowers class affordable heating and all those little items so they can get mega rich

    Oh... is that how one gets rich?

  • 0

    Jandworld

    Good to hear that despite all the money slothing around there are human values.

  • 1

    wipeout

    @fxgai

    If you don't like Zimbabwe, think advanced, industrialized Germany's former Weimar republic instead then.

    Christ, why?

    That was 100 years ago, and the republic emerged from the wreckage of the German Empire. You know, defeat in the war, punitive peace treaty, political instability, loss of all colonial possessions, restraint of trade, 2 million men of fighting age/fitness dead, many others wounded, many others lost to the influenza epidemic, stuff like that.

    Hyperinflation after a series of disasters on such a scale should not be an unexpected outcome, and it arrived fast, less than 3 years after the war in June 1921, peaking in 1923.

    What use is it as an example that has any particular relevance today? No advanced, industrialized nation is facing all-out military conflict, which is the kind of thing that would reset the clock the way Germany's was reset in November 1918.

  • -1

    fxgai

    I guess the military conflict was your main point. But although war was a feature of Germany's episode (and Japan's own high inflation episode), I don't see any logic to suggest that war is a necessary condition for government spending money it doesn't have (and isn't likely to see in the foreseeable future) to potentially have deleterious consequences for the economy's monetary system.

    Yes, Japan today is different, but printing money so that government can spend on an aging, shrinking, and decreasingly productive population, smothered by regulations and bureaucracy, always vulnerable to natural disasters, does not strike me as a guaranteed consequence-free behaviour.

    Of course I do hope that it all turns out OK.

  • 0

    JeffLee

    "think advanced, industrialized Germany's former Weimar republic "

    Germany had to repay its debts to foreigners in foreign currencies and gold. A competely, totally, utterly irrelevant case to Japan....whose debts are in its own currency and owed to its own people and institutions, including its public institutions..

    How hard is that to understand?!?

  • 0

    fxgai

    Germany did not print foreign currencies and gold, it printed loads of its own currency, as did Japan 70 years ago, as did Zimbabwe, as does Venezuela, and as does Japan in great amounts once again today.

    Like I said, I hope everything turns out OK. I'm just not going to be the one saying "gee, I never imagined that might be coming", should Japan this time not turn out to be different.

  • -2

    wipeout

    I guess the military conflict was your main point. But although war was a feature of Germany's episode (and Japan's own high inflation episode), I don't see any logic to suggest that war is a necessary condition for government spending money it doesn't have (and isn't likely to see in the foreseeable future) to potentially have deleterious consequences for the economy's monetary system.

    That's still a long way from putting Japan in the company of Greece, Zimbabwe, or early-1920s Germany. You haven't in any way shown how that is likely or even possible.

  • 1

    fxgai

    If you are happy believing with 100% conviction that Japan's government spending loads of money that it doesn't have is going to work out just fine (at least while you are alive), good for you. I wish you luck.

    The rest of us risk conscious & risk averse people will be as we are.

  • -2

    Akula

    When your working age population has been decreasing for 20 years, economic malaise is hardly unsurprising.

    The only way for Japan to fix its economic problems is for its people to have more children. Immigration in small doses is fine, but in large doses can result in what we have seen in Europe, so immigration in itself is only a small part of solving the problem.

    So the question, how do we get more of the passive, socially awkward young Japanese to meet people of the opposite gender, marry and procreate?

    Admittedly any increase in the birthrate can only help the workforce 2 decades down the track, but more must be done.

  • -1

    JeffLee

    "economic malaise is hardly unsurprising."

    But there isn't economic malaise. Living standards have risen over the past 20 years, and there's full employment I have lived in places in the past were there was economic malaise and they were nothing like modern-day Japan.

  • 0

    wipeout

    If you are happy believing with 100% conviction that Japan's government spending loads of money that it doesn't have is going to work out just fine (at least while you are alive), good for you.

    As I said before, you haven't shown how Japan's current position puts it in the company of the Weimar Republic or Zimbabwe. People who make extreme comparisons should - if they expect to be taken seriously - be able to make a case. What you offer instead is a sulky extrapolation of my comments into something I have certainly never said or implied.

    There is a difference between a) things not being "just fine" and b) financial and economic catastrophe of the kind faced by Greece, Zimbabwe, or Weimar Germany. If you don't understand that there is a difference, then your knowledge of economic matters, something you are clearly keen to parade, can be viewed with suspicion.

  • 0

    fxgai

    As I said before, you haven't shown how

    Like I said in my previous comment, you are welcome to believe whatever you like.

    People who make extreme comparisons should - if they expect to be taken seriously - be able to make a case.

    Before 3/11, no one took seriously the possibility of a massive undersea earthquake, followed by a tsunami, followed by nuclear meltdowns. No, I'm being silly. In fact few (if anyone) had even thought of that triple disaster scenario.

    Extreme? Did it happen?

    My personal view (and you are not requested to share it) is that it's a simple reality that Japan's government is spending loads more money than it actually has, and the central bank is financing today it by creating lots of new base money. This is an obvious similarity with basket cases from history (you are free to dismiss it as pure coincidence, if you like).

    Do I think this is guaranteed to have a bad outcome? No. Do I think there is a risk of a bad outcome? Yes. Do I know how probable the risk of a bad outcome is? No. So have I prepared my "emergency kit", just in case? Yes.

    At the end of the day, I could be completely right, and still we are all dead before a problem eventuates. That's how it goes.

    Maybe this seems extreme and crazy to you. That's fine with me. You can choose whatever life insurance policies you like, too.

Login to leave a comment

OR

Special Offers

Exclusive Robot Restaurant Discount

Exclusive Robot Restaurant Discount

Offer ends: Dec 31, 2016

Work
in
Japan

Search the Largest English Job Board in Japan.

Find a Job Now!

More in Business

View all

View all

Japan Investment
Properties

Listings Updated Daily

Search