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Shaky Japanese economy hit by growing trade deficit

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This is what happens when you use fake(or fudged) economic reports to support an increase in taxes to pander to investor sentiment. Abe should have been focusing on making a true economic turn around and improving the lives of the citizens of Japan. Stop listening to the IMF and do what is right for Japan!

-1 ( +5 / -6 )

Pander to investor sentiment? If investors decide to stop buying Japan's debt because the government isn't serious about ever paying it back fair and square, and long term interest rates consequently move up and cost anyone with a loan more money per month, how does that help anyone? Or if it's the currency selling off further that acts as the release valve, how will anyone like higher prices of imports?

The IMF's proposals have been mild considering the gigantic mess that Japan's finances are in. There just aren't easy solutions to this reality. If it isn't sales tax hikes, it's slashing spending, or debt monetization until the currency can take it anyone. (There's also praying for the greatest economic miracle in history too, but I don't assign that a high probability, even if Abe were to give it his best.)

The lives of the residents of Japan will only improve on a sustainable basis after decisions that cause short term pain have been made.

0 ( +3 / -3 )

Telecommunications equipment includes cellphones.

That's a hell of a lot of cell phones.

2 ( +3 / -1 )

There is a lot more of this to come until Japan starts reducing non-renewable energy use and brings more renewable energy online. Even with this shift, there is the problem of a shrinking population, which means fewer workers and consumer, but still high social welfare and corporate welfare costs. There has never been a country in the history of capitalism with a decreasing population, and GDP growth is basically attributable to more people using more energy. This said, Japan is still one of the wealthiest nations, so a reduction in living standards, meaning less material goods, is not a serious burden, if the burden is shared, which isn't happening. Right now the trend is towards growing wealth and income gaps, and as this continues to worsen, it will be a greater source of social disharmony.

-2 ( +1 / -3 )

Stupid Abe has yet to realize that Japan is a rapidly greying nation which is being supported by its young workers.Workers are being screwed to the nth degree with the highest rates of tax in Japanese history. Why do young families have to pay tax on food,baby clothes and education ? They don't know but look at the birth rate!

Japanese have given up having kids since they can't afford it.....

2 ( +6 / -4 )

There is only one way out in future. Argentina default style! What does it mean? Savings are gone, pensions are gone... new currency will be introduced and everything can start at Zero again.

No other plan B than the country declares bankcrupsy. Make sure you have some of your yen money parked somewhere else... and dont be bother to pay into pension funds cos they simple will not exist in a few decades time.

-3 ( +1 / -4 )

I haven't seen any tangible effort by Japanese companies to make inroads abroad. There seems to be a lot of energy & money going into creating growth here, but it's done in vain. Greying population, declining birh rate, stagnant wages & higher living costs - ALL CONNECTED.

0 ( +0 / -0 )

The latest numbers translated into a trade deficit of 10.47 trillion yen for the first nine months of the year, a 35 percent leap from a year ago.

So this has zero to do with fuel imports. Electricity prices for industry have not risen 35% to match this drop in in exports. So why then still pushing nuclear? Who is losing big money due to idle nukes? You, me or the energy ministers portfolios?

0 ( +1 / -1 )

No worries, all that has to be done is raise the consumption tax to 10% so the government will have more money to spend, and the economy will recover!

-3 ( +1 / -4 )

There has never been a country in the history of capitalism with a decreasing population

Oh? !8th century Ireland: The population fell by at least 20% through starvation and emigration.

1 ( +2 / -1 )

Stop importing so much fuel to run the power plants, get reactors back on line, that is one major problem that needs to be sorted out fast.

Exports have increased 6.9% the article states, this is good and a result of weakened yen.

3 ( +6 / -3 )

@yakimo,

Japan is nowhere near that point. Abe's major pitfall was being far too aggressive in raising taxes before his reforms were more widely felt. He devalued currency then taxed people more before companies felt the benefits of a weaker yen which would have then spurred them to increase wages. The wage increases are slowly starting to happen, but the economy is still pretty shaky since those wage increases are slow.

Furthermore, LNG imports are crushing Japan's balance of trade, and making energy more expensive. Once the reactors are on again (a necessary, if temporary, step regardless of your position), the deficit will be a bit more positive.

The future of Japan is not in default. Japan is nowhere near defaulting on its debts, despite the size relative to GDP. Instead, the future of Japan's economy lies in growth. A few decades of stable yearly growth (in the neighborhood of 3%) will solve their debt crisis.

Responsible and limited immigration, and a greater role/respect for women in the workplace (as both mothers and workers) will also grow the Japanese economy. The TPP (which Japan wants primarily to force its various sectors to become more competitive, not because it wants American/Australian goods), and the European equivalent that Japan is currently working on will do the same.

These are just the musings of some guy on the internet, but we are far from throwing our hands in the air saying: "we're totally screwed! game over! Abe should resign and continue Japan's decade of instability (and set back our beautiful wives/girlfriends/friends/daughters/sisters another five years)!"

0 ( +3 / -3 )

This Economic storm has been on the cards for 20 years, and we might be experiencing a squal now but in 5 years the full impact might hit. Lack of good Governance, lack of change, lack of a work force, corruption and a retire system that will fail. Manufacturing goods that now others do cheaper. Other countries also import their energy it's not unusual, Japan's or the Governments insistence on restarting Nuclear has much more to do with "vested" interest.

-2 ( +1 / -3 )

Nice post MGigante, someone else with a clue, mean while the others throw their hands in the air yelling we're totally screwed as they have no idea.

-5 ( +0 / -5 )

@mgigante nowhere near? 260% debt to GDP.... 40% of budget needed to serve bond industry.... trade surplus with usa tied up in worthless us bonds... japan holds the biggest amounts of us bonds... thats due to the trade surplus but it doesnt bring money back to japan ! You know why Japan has not yet declared a default? Cos 95% of its debt its owned by their own people via bond investments. If they will figure that mess out on day it can be over very quick. And how do you find new people for bonds in future when the aging population needs that cash for living?

Just look around the big cities in Japan, its falling apart... smaller cities die out quickly. Businesses closing down, cityhalls have less tax to spend.... schools, hospitals closing....

Those are facts when you travel around and open your eyes.

If you spend 3 times as much money than you earn would you not consider yourself broke?wondering who will lend you money... I forgot to mention the exponential effect of the money system we have....

40% of the yearly budget is used to serve debts via bonds!!! Onces japanese people figure out that they are investing their hard earned cash in the countries debt repayments ..... one of the biggest ponzi schemes the world has seen so far. http://www.nationaldebtclocks.org/debtclock/japan

have a look there... japans debt more than 1.000.000.000.000.000 YEN

the interest payment per year are alone about 14.000.000.000.000 YEN every citizen has more than 8Mio Yen debt.....

how on earth do you repay this? with aging population, less consumer spending.... more payments for pension...

Maybe its time to wake up and see the facts....

2 ( +2 / -0 )

Yakimo why do you think it will be or must be repaid ?

The US has large debt it cannot repay too, many nations run upside down, japan just happens to be the largest upside down account.

The Japanese are not all at once going to ask for their savings, that is not going to happen.'

0 ( +1 / -1 )

MGigante,

Japan is nowhere near defaulting on its debts, despite the size relative to GDP. Instead, the future of Japan's economy lies in growth. A few decades of stable yearly growth (in the neighborhood of 3%) will solve their debt crisis.

I admire your optimism, but a few decades of stable annual growth of 3%... in Japan?

I'd like to see the future debt trajectory charted together with the supposed tax revenues that this growth could reasonably be expected to generate, also taking into consideration that long term interest rates ought to rise if Japan is able to achieve such growth over a sustained period of time, which would require the government to allocate even more tax revenues to servicing it's outstanding debt (can growth provide extra revenues faster than the debt can snowball?).

Such growth might be possible in Japan, but I think not until it's current malaise is well and truly dealt with one way or the other and truly massive changes are made. Abe talked big but delivered little, in the absence of a crisis of sorts to impress on people that it is neccessary I don't see it happening.

The budget shortfall is really quite huge. Spending (close to 100 trillion) is roughly twice tax revenues (50 odd trillion) as it is. Either big spending cuts have to happen or some serious miracle growth (or more realistically, tax hikes) is needed to plug this up in the years ahead. And that's before they start to actually bring the debt down to more managable levels. The government today has spending completely out of control, I have little confidence they will fundamentally improve in the near future.

Abe's major pitfall was being far too aggressive in raising taxes before his reforms were more widely felt.

For me, he just stuck with the pre-ordaned tax hike plans. I don't think he has gone anywhere near far enough with his reforms, which have so far just set everyone up for dissapointment.

StormR,

On an individual level I'm with you that people can take measures to improve their lot, but as a whole I can't see that Japan has a bright future staring it in the face right now.

0 ( +0 / -0 )

storm r your dead right m8 you need to stop importing all of that dirty fossil fuel get the nukes back on on line and start paying back the dept! Japan has buried its head in the sand for to long when it comes to economics its going to take a brave man to change from the "old ways" lets face it they have not worked for 25 years, so why carry on with them? you have a brave new leader, give it time and things will recover, but there is going to be some tough calls and a tough time is ahead.

1 ( +2 / -1 )

StormR,

Yeah, no need to pay all the debt back, but letting it snowball bigger endlessly, while the country struggles to grow in the face of all its headwinds, is a recipe for eventual trouble. Higher taxes,

The US, while truly shabby, is looking far better than Japan IMO. They at least have a movement in favour of restraining and cutting government spending. A couple of election terms and things can change. They will also likely be energy independent before long.

Japan? The bureaucracy here runs the show, and they have just put together record spending requests in excess of 100 trillion yen for the first time ever, at the same time as the government is considering raising taxes to show it's "fiscal discipline". It just doesn't add up.

-1 ( +0 / -1 )

fxgai yeah the bureaucracy runs the show here meanwhile in the US crooked big business and crooked banks run that show.

-1 ( +0 / -1 )

fxgaiOct. 22, 2014 - 05:36PM JST

Yeah, no need to pay all the debt back, but letting it snowball bigger endlessly

The interest rate of long term (10 year) Japanese Government bond is less that 0.50% pa. If you crunch the numbers, you will find that it takes 139 years for the debt to double. Whereas, with just 1% inflation rate, the price of goods goes up to 4 times of the current level during that 139 years. That means the debt is halved in real terms. So much for the snow ball story.

In addition, the government can print as much yen as it wants through Bank of Japan. So, the government does not need to worry about the repayment. Is anyone worried about inflation? The economic problem in Japan is deflation and the one and only cure to deflation is inflation.

1 ( +3 / -2 )

its interesting to see what the normal people know about the system. reckless is the best..... no more comments.

people keep working and save the cash for later.... but dont forget the only thing was running out in life is TIME!!

0 ( +1 / -1 )

@fxgai

"Yeah, no need to pay all the debt back..."

I know you're being ironic and sarcastic, but your statement taken at face value is correct. Japan doesn't need to pay back its fiscal debt....because Japan is the one who holds it. Doh! It's a matter of moving numbers from one column of the spreadsheet to another column. Sorry, that ain't "crisis" material.

As for the Argentina comparisons....hello, planet Earth. Where are the foreign hedge fund traders demanding Japan honor its obligations. (HInt: there are none. Go find yourself another world view.)

0 ( +1 / -1 )

CH3CHO,

The interest rate of long term (10 year) Japanese Government bond is less that 0.50% pa.

As of today sure, but should long term interest rates rise for whatever reason (e.g. the global economy gets better maybe), 0.50% pa will likely be just a fond memory.

I don't believe it's reasonable to assume that long term interest rates will stay at current levels for the next hundred years.

Whereas, with just 1% inflation rate, the price of goods goes up to 4 times of the current level during that 139 years. That means the debt is halved in real terms. So much for the snow ball story.

Yeah, but who would own Japanese debt for a hundred years if they believed this scenario was realistic? They would be getting screwed.

It's not just the existing debt that is a snowball - there is also the additional debt that the government keeps adding each year through it's out-of-control spending programs.

In addition, the government can print as much yen as it wants through Bank of Japan. So, the government does not need to worry about the repayment.

That's one option but it has it's own potential negative consequences, and the fall of the yen over the past couple of years is evidence enough.

Is anyone worried about inflation?

Apparently lots of businesses are complaining about the increasing cost of imports due to the weakening yen, so I'd say there are some who would say yes.

The economic problem in Japan is deflation and the one and only cure to deflation is inflation.

The government debt is a massive burden and results in misallocation of Japan's increasingly scarce resources on useless unproductive stuff. Deflation was a symptom not a cause of Japan's problem, in my eyes. Destroying the value of the yen has been putting the cart before the horse.

JeffLee,

I know you're being ironic and sarcastic, but your statement taken at face value is correct.

Actually I wasn't being ironic and sarcastic, but at least we agree on that much.

Some level of debt is OK, but in Japan's case 1 quadrillion yen's worth of debt, and increasing steadily, is far too much.

0 ( +0 / -0 )

@warispeace

Do you even know how renewable energy works or the costs associated with it? From a pure monetary perspective, solar, wind, hydroelectric, etc are all more expensive than nuclear. Coal is actually the cheapest, even if it's imported.

I agree that they have to have a better mix, but subsidizing solar panels is not the way to reduce debt. Solar sounds great on paper, but there are a host of problems associated with it that makes them inefficient and costly vs other energy sources.

2 ( +2 / -0 )

The weakening yen,rising prices and static wages make me question why I am in Japan .....

0 ( +0 / -0 )

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