Most Japanese cars and electronics are made in Thailand and other countries. Most Japanese companies have moved their manufacturing overseas, so this has impacted on job numbers in Japan and also industrial output. However this is not the main reason why Japan's economy is doing poorly.
The main reason why Japan's economy is in free fall is not because of falling exports. It's actually because of low domestic spending, a decrease in real wages and also because of the huge cost of energy exports due to the Fukushima nuclear disaster. Japan imports the vast majority of their energy and this has resulted in current account deficits since 2011. Japan always used to post current account surpluses in the past.
Japan's GDP has fallen from $5.7 trillion to $4.3 trillion as of Q3 2014. Part of the reason has to do with the falling yen, but also recessions following the 2011 earthquake, tsunami and nuclear disasters. But GDP figures are all fake anyway and really they reflect nothing about the health of an economy. Real wages in Japan are decreasing, quality of life is decreasing and the number of pessimistic Japanese consumers outnumber optimists. This highlights that Japanese consumers will not spend any money. Inflation has also slowed down, further curbing domestic spending.
Countries like South Korea, Taiwan, Germany and many other European nations are facing the same problem. I guess South Korea has some sort of back up since it has North Korea which has a relatively high fertility rate and a higher proportion of young people. But it is still a HUGE problem for these countries nonetheless.
Here's an explanation of Japan's debt problem (currently more than twice their GDP):
Just because Japanese debt is held internally does not mean that it doesn't have negative effects on the Japanese economy. Actually far from it. It all has to do with interest rates and government revenue.
Also the increase in consumption tax from 5% to 8% and soon to be 10% was a move by Abe in the name of capitalism. The Japanese public's quality of life suffers, while Japanese investors and companies are happy. The last time Japan raised its consumption tax, it caused a recession.
The Nikkei's level right now is about 60% less than it was 20 years ago. It just reflects how much regression and stagnation that the Japanese economy has endured in the lost 2 decades.
On September 15 2014 23:29 AutoEngineer wrote: Countries like South Korea, Taiwan, Germany and many other European nations are facing the same problem. I guess South Korea has some sort of back up since it has North Korea which has a relatively high fertility rate and a higher proportion of young people.
On September 15 2014 23:29 AutoEngineer wrote: Countries like South Korea, Taiwan, Germany and many other European nations are facing the same problem. I guess South Korea has some sort of back up since it has North Korea which has a relatively high fertility rate and a higher proportion of young people.
This was said in jest, right?
There's been a lot more talk of reunification in the South Korean media recently. Some cable channels are now dedicated to covering only North Korea. I assume this trend could only have been started by the ones in power...
While the scenario pictured in the video could happen, it put aside the fact that Japan can just monetize part of its own debt. Pretty good post by the way, very clear.
The tax increase is actually a lot more than just 3%. Traditionally, stores list prices that include taxes. Instead of redoing all of their price tags, and have the numbers look funny (e.g. 100 yen for a bottle of coke), a lot of stores just put up a bigger sign that says "prices exclude taxes", so in reality, a lot of stores have jacked up their prices by 8%. We aren't talking about shady corner stores, even fking Starbucks did this. So when taxes go up again by 2%, we might actually be looking at another 10% increase in prices. Of course, this is all part of Abe's brilliant strategy to artificially raise inflation. Just because inflation is going up (even excluding the 3% tax increase), it doesn't mean total good purchased have gone up, and recent economics data support this unfortunate finding.
Japan's economy will be fine though. Government of Japan will continue to set up pointless jobs to keep unemployment rate down. Bank of Japan will continue to issue JGB. All the people, corporations, and megabanks will continue to gobble up all the JGB. It's a beautiful cycle that will never burst. We are already looking at sovereign debt of something like 200% of GDP, it'll just continue to rise, until something breaks in the chain, which is highly unlikely.
Are you trying to rally the "StarCraft is dead" crowd to a new cause? Rumors about Japan's demise have been overblown for a very long time now. It's not to say they don't have problems, but the economy is not in "free fall".
It's hilarious how the OP juxtaposes bad GDP news as proof with "GDP numbers are all fake anyways". And do you have a source showing how quality of life in Japan is going down?
The Nikkei's level right now is about 60% less than it was 20 years ago. It just reflects how much regression and stagnation that the Japanese economy has endured in the lost 2 decades.
Or maybe how high the bubble in all Japanese assets reached in the 1980s.
the video seems silly though, debt is again treated just an obligation and not an asset, foreigners are treated like idiots, the last 20 years of japan being able to do something that economics text books say is impossible to do is ignored. Basically the only thing that isnt questionable is the fact that Japan's demographics are kind of bad.
Real GDP per Capita is doing fine. In fact, depreciation relative to the dollar makes their exports cheaper, is actually a good thing for them.
I like the structure of your post, but by simply posting a couple of completely misleading and inaccurate facts, I cannot take your post seriously and don't which to research the other acts myself to check its validity.
Real GDP per Capita is doing fine. In fact, depreciation relative to the dollar makes their exports cheaper, is actually a good thing for them.
I like the structure of your post, but by simply posting a couple of completely misleading and inaccurate facts, I cannot take your post seriously and don't which to research the other acts myself to check its validity.
The problem is not real GDP per capita but potential growth. All estimations before the lost decade viewed Japan way higher than it is now, and then it kinda stagnated. The comparaison with Germany is a bit misleading because Germany never had the economic success everybody believe it have, in regard to growth at least (it's just an export powerhouse). A good way to see the problem with potential growth is to compare real gdp to the US : in 1990 both the US's and Japan's GDP per capita are really close, in 2000 the US had gone from 32k $ to 40k and Japan from 32K to 34K. For economists it means that Japan was not able to use its full potential, for various reasons.
It's true that the depreciation of the yen is a good thing for them. The post is kinda well argumented but fails, like every other discussion about Japan (or any other country nowadays...), in trying to argue that this high debt is some kind of bubble that will explose and create a massive crisis. Meanwhile Japan has no difficulty to endebt itself which contradict everything this theory suggest.
Real GDP per Capita is doing fine. In fact, depreciation relative to the dollar makes their exports cheaper, is actually a good thing for them.
I like the structure of your post, but by simply posting a couple of completely misleading and inaccurate facts, I cannot take your post seriously and don't which to research the other acts myself to check its validity.
The problem is not real GDP per capita but potential growth. All estimations before the lost decade viewed Japan way higher than it is now, and then it kinda stagnated. The comparaison with Germany is a bit misleading because Germany never had the economic success everybody believe it have, in regard to growth at least (it's just an export powerhouse). A good way to see the problem with potential growth is to compare real gdp to the US : in 1990 both the US's and Japan's GDP per capita are really close, in 2000 the US had gone from 32k $ to 40k and Japan from 32K to 34K. For economists it means that Japan was not able to use its full potential, for various reasons.
It's true that the depreciation of the yen is a good thing for them. The post is kinda well argumented but fails, like every other discussion about Japan (or any other country nowadays...), in trying to argue that this high debt is some kind of bubble that will explose and create a massive crisis. Meanwhile Japan has no difficulty to endebt itself which contradict everything this theory suggest.
Yep, I'm a couple months away from completing my Economics degree, so I am well aware of the concepts.
Anyway, I agree there are issues, and frankly few people here would be qualified to argue them. There really is a lot that goes into their problem that they are having, and it's not just a black and white answer, that's why so many economists are split on explanations. I appreciate well developed arguments, even if they are very contested, however when someone with what appears like little economics background attempts to formulate an argument about such a complex topic, it never turns out well.
However, looking at strictly GDP's, the numbers don't look bad for Japan:
They are on point with other developed European countries like France and England (Canada also) in the last fifteen years. The lack of growth as great as USA can be greatly attributed to factors like their lack of land to expand, environmental factors being amplified, and so forth. I looked through every Economic Policy indicator, and none of them scream "Japan is plummeting".
Yes, they need reforms, but I don't think their issues are much worse (if not better), than those in the USA, Italy, Spain, Greece, etc.
On September 16 2014 01:51 FiWiFaKi wrote: Real GDP per Capita is doing fine. In fact, depreciation relative to the dollar makes their exports cheaper, is actually a good thing for them.
Depends on how much that export relies on imported raw materials and energy. Japan imports a huge amount of oil and natural gas (for which they pay about 70% more than most EU countries pay to Russia).
On September 16 2014 01:51 FiWiFaKi wrote: Real GDP per Capita is doing fine. In fact, depreciation relative to the dollar makes their exports cheaper, is actually a good thing for them.
Depends on how much that export relies on imported raw materials and energy. Japan imports a huge amount of oil and natural gas (for which they pay about 70% more than most EU countries pay to Russia).
Also true, but given the nature of the global macroeconomic situation, the type of sectors they compete in on the global market, and the fact that they struggled with low inflation to the point of deflation for a long time, I believe that depreciation is in their best interest. A couple simple "5 minute reads" articles that someone might find interesting:
If the issue is Japanese aren't consuming and leaving so much wealth in saving then can't this be resolved by having the central bank raise interest rates so people will be less inclined to keep their money in savings?
On September 16 2014 06:00 GettingIt wrote: If the issue is Japanese aren't consuming and leaving so much wealth in saving then can't this be resolved by having the central bank raise interest rates so people will be less inclined to keep their money in savings?
Na increasing interest rate is not a solution, quite the opposite (a high interest rate discourage credit). What they need is more inflation, and they're trying hard to respect this 2% inflation target but imo it's still too low.
Japan is not in crisis state, it is just unable to reach its true potential growth because its demand is atone since twenty years.
On September 16 2014 06:00 GettingIt wrote: If the issue is Japanese aren't consuming and leaving so much wealth in saving then can't this be resolved by having the central bank raise interest rates so people will be less inclined to keep their money in savings?
Na increasing interest rate is not a solution, quite the opposite (a high interest rate discourage credit). What they need is more inflation, and they're trying hard to respect this 2% inflation target but imo it's still too low.
On September 16 2014 06:00 GettingIt wrote: If the issue is Japanese aren't consuming and leaving so much wealth in saving then can't this be resolved by having the central bank raise interest rates so people will be less inclined to keep their money in savings?
Na increasing interest rate is not a solution, quite the opposite (a high interest rate discourage credit). What they need is more inflation, and they're trying hard to respect this 2% inflation target but imo it's still too low.
I typed increase but I meant decrease haha.
I'm pretty sure the target interest rate are already at their lowest possible (0 %). That's the reason why Japan situation is textbook for people like Krugman.
On September 16 2014 06:00 GettingIt wrote: If the issue is Japanese aren't consuming and leaving so much wealth in saving then can't this be resolved by having the central bank raise interest rates so people will be less inclined to keep their money in savings?
Because you can't raise, simply put.
Inflation rate is 0 in Japan, which means real interest rate = nominal interest rate...
If Japan makes their nominal interest rate high, they are making their real interest rate really high, all that will cause is bring foreigners to invest money in Japan, and deplete all of Japan's reserves. A similar situation occurred in Australia not too long ago. Artificially changing the interest rate is extremely taxing resource wise for the government, and according to Chicago thought, it should never be done. There is monetary policy, and there is fiscal policy... One deals with money supply, one deals with government spending, that's what we get to control.
Simply put, when you are told you'll get a 1% interest rate in Japan, it's not very tempting to invest, and setting it high will bring foreign investors to make money, but doing nothing for Japan.
But when in a western country the inflation is 3%, and you are offered 4% interest rate, it feels a lot more tempting, even though the real interest rate is effectively the same 1%.
As we know, change in inflation is proportional to change in money supply, and I believe that printing money would help their economy by generating manageable inflation, but the authorities in Japan are opposed to this notion for complex reasons, as they exercise a different economics theory. I think the Japan government is very fragmented, and it's a root of many of it's economic problems, but there are arguments for why you would like to keep money supply constant, so of which are explained here:
edit: Oh, another thing to mention, printing money is not a simple solution as it seems, as currently Japan is in a Liquidity Trap, and by definition monetary policy does not work. So a very expansive monetary policy is needed, but that creates the great risk of hyper inflation.
On September 15 2014 23:29 AutoEngineer wrote: Countries like South Korea, Taiwan, Germany and many other European nations are facing the same problem. I guess South Korea has some sort of back up since it has North Korea which has a relatively high fertility rate and a higher proportion of young people.
This was said in jest, right?
No, I wasn't joking at all.
If you've read the media in the past 12 months, there is a lot of talk about South Korea's plans to reunify and the economic strategies they are currently investigating when a sudden collapse happens in North Korea.
The exact time of reunification is not certain, however it's very clear that when South and North Korea reunify, this will boost the young population, increase fertility rates and Korea's economy may overtake France, Germany and Japan by 2045.
United Korea economy could pass Japan: Goldman Sachs
Korea has HUGE potential to overtake Japan. Japan is the most aged country in the world. You don't know much impact this is having on their economy.
Korea is facing a demographic crisis as well. But North Korea will give Korea much needed man power, young population and natural resources (worth $6 trillion USD according to one report).
Germany is doing far better than Japan because it has lower public debt, it is a bigger exporter than Japan, it doesn't have to import a lot of energy, and their demographics are in better shape.
On September 16 2014 06:37 F1rstAssau1t wrote: All i know is that Japan is a lot like Germany, no matter what happends they always rise.
Germany's economy is doing far better than Japan's.
On September 16 2014 01:29 coverpunch wrote: Are you trying to rally the "StarCraft is dead" crowd to a new cause? Rumors about Japan's demise have been overblown for a very long time now. It's not to say they don't have problems, but the economy is not in "free fall".
It's hilarious how the OP juxtaposes bad GDP news as proof with "GDP numbers are all fake anyways". And do you have a source showing how quality of life in Japan is going down?
IT IS crisis mode in the Kantei, the office of Shinzo Abe, Japan’s prime minister. A succession of awful data has pummelled his economic programme, which consists of three “arrows”: a radical monetary easing, a big fiscal stimulus and a series of structural reforms. On September 8th revised figures showed that GDP shrank by 1.8% in the second quarter, or by 7.1% on an annualised basis, even worse than the initial estimate of 1.7%.
Maybe not in "freefall" but still in crisis mode, give or take. I'm sure you realized that I didn't mean that Japan's economy is going to collapse any second.
EPT
![[image loading]](http://www.global-rates.com/images/charts/gr-cb-chart-12-1012.jpg)
