Japan's economy contracts 1.4% in Oct-Dec quarter

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    Warm weather. I didn't feel the need to buy a new coat, or winter tyres.

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    Excellent. So that is why the Yen is getting stronger, because the economy sucks. Makes no sense to me. Abe should retire.

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    Gary Raynor


    Excellent. So that is why the Yen is getting stronger, because the economy sucks. Makes no sense to me. Abe should retire.

    Noooo... The reason the Yen strengthens is because Japan runs such big current account surpluses. Is that difficult to understand?

    The Japanese Yen shouldn't have been allowed to weaken in the first place.

    The one thing I agree with Jefflee about is relative to demographics, the Japanese economy is not do that badly over the last 10 years.

    The economy is not the problem, the government spending revenue that they don't have is ultimately the problem with Japan - here Jefflee and I disagree. The Japanese government is addicted to spending and the only way it can continue to do so, is to increase the tax revenue it pulls in. It tried to do that by weakening the Yen and it has quite clearly failed.

    You don't cure a junkie by feeding their habit.

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    strategy for reviving the economy through inflation fueled by massive monetary easing is not delivering as promised.

    Good that people are realising this now. Wrong medicine.

    So that is why the Yen is getting stronger, because the economy sucks.

    IMO the yen has strengthened recently primarily because investors, who over the past few years borrowed yen to fund foreign asset purchases, are now selling their foreign assets because the global economy is going through a rough patch, and are thus also buying back yen to return the funds that they borrowed in the first place.

    So there has been a bit of a rush this year to buy yen, but such demand will be temporary. Once the fears about the global economy settle down, it will be yen borrowing and selling to fund non-Japanese assets all over again. Same story with the Euro.

    These episodes provide a good chance to dump one's yen for currencies with better long term prospects.

    Economically the US looks the best, especially with buckets of cheap energy under their back door step. But depending on which clown becomes POTUS things might look a bit gloomier there next year.

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    Funny that highly paid mainstream economists predicted a .7% contraction, just as they have under-predicted previous contractions. Someone asked me last week what I thought the contraction would be, I told them "it'll be double what Bloomberg are predicting". Unfortunately, I was right. And when the numbers are revised again in a few months, don't be surprised if the number is even worse. The problem is that many mainstream economists are fans of centrally-planned economic policies, despite their universal failure record.

    The Japanese Yen shouldn't have been allowed to weaken in the first place.

    Every currency should be allowed to do what the market makes it do. The yen, dollar, euro, or yuan should not be under the control of the various governments which issue it. Money is a means of storying or transporting the value of labor, and the market assigns the primary value to labor, as well as to goods. Money belongs to the people, not to the governments which issue it. When governments begin tampering with the money supply in order to effect the value of it, they are doing so for two main reasons, to gain an advantage for their industries on the world market, or, like more recently, to devalue the amount of their vast debts. Both reasons are plain wrong, and unfair to the market, and to the people.

    The problem is that no matter what the policy, or what central banks do to manipulate the value of currency, the market cannot be defied. It can be temporarily resisted, but in the end, the market will dictate how much anything is worth. When governments manipulate the value of currency, they can affect the prices of stocks, commodities, and other goods, but only for a short time. The market eventually brings everything back into a balance. The problem is that these interventions turn what would be up and down cycles into boom and crash cycles. And the longer governments try to prop up or inflate booms, the greater the resulting crashes are.

    Economics is painfully simple, so simple that most people can't grasp the concept. To be economical is to get the greatest result for the least effort. Customers want the best product for the least amount of money. Companies want the largest amount of return on the investments they make, employers pay the least amount of money possible for the labor their workers provide, the workers do the minimum work they can get away with to earn their pay. In the end, the market decides what is a fair price, a fair return, a fair profit, and a fair wage. People may not get what they want (on one ever does), but they get at least what they need.

    Whenever there is an intervention in the market to regulate returns, profits, or wages, there will be a short-term gain (or loss, depending on the party being regulated, and how), but eventually the market will revert these to their natural values, sometimes painfully. These changes often take time, they can be delayed, but they cannot defied. Anything which goes up, must come down, but the longer and higher it is propped up by intervention and short-sighted policy, the harder it is going to come down.

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