One is shorter term -trade deficit grows despite major yen devaluation.
Via Bloomberg Japan’s export growth slowed in September and the nation extended a record run of trade deficits, underscoring the challenge for Prime Minister Shinzo Abe in sustaining momentum in the world’s third-biggest economy. Shipments (JNTBEXPY) increased 11.5 percent from a year earlier, the weakest pace in three months, a finance ministry report showed in Tokyo. That compared with a 14.6 percent gain in August and the 15.6 percent median forecast of 24 economists surveyed by Bloomberg News. Imports (JNTBIMPY) climbed 16.5 percent, leaving a trade deficit of 932.1 billion yen ($9.5 billion), an unprecedented 15th straight shortfall in data back to 1979. Second is demographics via Mish and the Guardian (not only are the young not marrying and baby production is a the lowest level EVER in Japan - they are not even having sex) Maybe The Vapors had a point. Here is a Vice segment on the phenomenon. IMO Technology is playing a significant role. Forbes
The International Monetary Fund (IMF) quietly dropped a bomb in its October Fiscal Monitor Report. Titled “Taxing Times,” the report paints a dire picture for advanced economies with high debts that fail to aggressively “mobilize domestic revenue.” It goes on to build a case for drastic measures and recommends a series of escalating income and consumption tax increases culminating in the direct confiscation of assets. That is what I have been saying all along.
Counter programming via NY Times.
"A marked improvement in capital expenditure led to an upward revision in April-June gross domestic product to an annualized 3.8 percent expansion from a preliminary 2.6 percent increase, according to data released by the Cabinet Office." This month I have been acknowledging my previous under estimation of the awesome powers of CBs to prop up their economies in the short run through QE. (this highlights even more what the European periphery (PIIGS) is missing out on) Will structural reforms follow? However, real wages for most industries in Japan continue to fall. from the WSJ : "Mr. Abe has acknowledged that without substantial wage growth, there can be no sustainable economic expansion." As I said last week, I am not sure how to interpret these conflicting signs or how to update my pessimism.. It strikes me the root of this is the protection/subsidies given to corporates in Japan. Japan has had real falling wages, (and continues to) so the problem to me does not seems to be in wage cuts which is what economists euphemistically call labour market reforms.
Ok it could also mean legislation that allows companies to layoff workers cheaply. But if these workers are laid off cheaply who foots the bill for a 45 year old that can't get a job -the social safety system, meaning the income tax payer principally. Once again corporate tax reform, before anything else, imo is needed and is the missing piece in most developed countries plans. (I am in favour of super high rates for the rich btw). Japan is a country that values social cohesion, and to maintain social cohesion the state will need to play a bigger role in the future to underwrite labour market risk is they are going to have political reforms that restore competitiveness of Japanese industry. Much of the recent evidence emerging in trade shows that the rich are not job creators in their own country anymore- they are job offshorers and capital buyers. This is causing extreme income inequality and ultimately if it continues will destabilize these democracies. Moreoever, intergenerational wealth mobility is decreasing so we can't even argue that life is a lottery where most have a similar chance of success given long grinding periods of hard work. So those that benefit from globalization and technology- the ultra rich and multinationals can and must pay more. Zerohedge cites Morgan Stanley report
I can't tell if the reforms are working, certainly exporters like Toyota have benefited from a weaker Yen. But households are not yet feeling the love. They are a vital link in the Abenomics chain,
"When asked, in the abstract, about the "growth potential" of the Japanese economy, responses are less pessimistic than in previous quarters. But when asked about their own household's experience, the situation still looks pretty bleak. In one question, respondents are asked, "What do you think of your household circumstances compared with one year ago?" Only 4.9% say they are better off, while 39.2% say they are worse off, and the rest say it is difficult to tell." as some expected.
|
Categories
All
Archives
March 2016
|