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Nyxisto
Germany6287 Posts
japan does not need to balance its budget. it already has a hard time dealing with a shortfall in domestic consumption. why is 'balancing the budget' a priority for them atm Well because not balancing the budget has resulted in a permanent fiscal and monetary hangover that is completely ruining their economy. | ||
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oneofthem
Cayman Islands24199 Posts
foreign investment is low in japan because of its somewhat closed financial and corporate finance world. govt bond is not investment. when you are talking about financing government debt they do not need to rely on foreign capital. | ||
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Nyxisto
Germany6287 Posts
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oneofthem
Cayman Islands24199 Posts
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Nyxisto
Germany6287 Posts
Also what do you want me to address about private and public debt? As I already said both are closely related as one of the biggest reasons for an increase in public debt was actually Japan's government financing indebted businesses after the bubble burst to help the economy recover. | ||
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Banaora
Germany234 Posts
On December 30 2014 12:46 oneofthem wrote: you are just reciting general platitudes without thinking it through. how is it a burden when japan bond is yielding so low. how do you not address the difference between private and govt debt? I'd like to point out that one kind of debt can be converted into the other by the government. private->public: The government pays for a certain amount of debt from each household at a certain time. So the amount of debt is transfered from private to public debt. There are many ways to do similar things. The government could also just hand out money to every household for nothing in return... public->private: Increase taxes or make people to buy government bonds for example through forced loans on their property (houses etc.). On December 30 2014 12:53 Nyxisto wrote: It's a problem because the debt has to be paid in someway, and now we are back to taxes. As Japan is not able to finance their debt through foreign investment they have to resort to increased taxes which puts a strain on tax payers further reducing demand and effectively increasing inequality within the country. No they don't have to increase taxes or something similar. They could alternatively just print the money they need to repay their debt. | ||
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Sub40APM
6336 Posts
On December 30 2014 12:53 Nyxisto wrote: It's a problem because the debt has to be paid in someway, and now we are back to taxes. Why are we back to taxes? The market for Japanese bonds -- as indicated by the low rates it is prepared to accept and by the lack of inflation in the Yen -- seems pretty content to be paid with more Japanese pieces of paper. As Japan is not able to finance their debt through foreign investment they have to resort to increased taxes which puts a strain on tax payers further reducing demand and effectively increasing inequality within the country. They dont have to finance their debt through foreign investments. Again as youve yourself said, Bank of Japan prints more money, hands it over to Treasury, Treasury gives them Japanese Bonds. No hyper inflation in sight. Which is why gold promoting websites like zerohedge have a particularly, almost Korean-channeling the OP of the thread need to 'prove' Japan is doomed. Whats been happening in Japan for now 30 years no one has actually been able to explain well at all. No economist at all. Japan is literally breaking macro text books on the monetary side. | ||
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Sub40APM
6336 Posts
On December 30 2014 12:27 Nyxisto wrote: Well because not balancing the budget has resulted in a permanent fiscal and monetary hangover that is completely ruining their economy. You are channeling the emotional sentiment but not understanding the mechanism that is supposed to underlying it. A monetary hangover would be something like Japanese bond yields starting to rise rapidly because the market expects the deficit to continue -- ie something that happened to Greece or Spain. But here it has not happened -- ever. People have been betting on the rise of Japanese bonds yields for like 20 years, and they have been losing that bet. The fiscal overhang concept comes from the idea that 'stimulus doesnt work' because present spending does not trick the market/consumer/whatever because they realize that sometime in the future fiscal stimulus has to be paid off and if the multiplier is less than 1 -- ie if debt spending now doesnt generate enough new income to cover itself then the market will appropriately 'bake in' the stimulus, in other words disregard it. This might be visible in Japan with the raised consumption tax, but the other signal -- the disbelief that 'new economic activity will increase' is not showing itself in the bond market. (I mean, we can get philosophical here and actually say it IS evidenced in the bond market because the bond market doesnt believe the economy will ever inflation grow, ie the US T bond yield reached a really low yield in 09 before the Fed began its massive bond buying because everyone expected a long depression but thats another whole thing) Where again, the idea that the government is now permanently increasing its deficit and that it will have to do something it doesnt want to would be evidenced in the bond yields. | ||
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Lazare1969
United States318 Posts
On September 17 2014 06:08 FiWiFaKi wrote: Japan has an aging population for 2 reasons: 1) Just like everywhere else in the western world, low fertility rates, Japan is not special in this regard compared to anyone else: http://kff.org/global-indicator/total-fertility-rate/ 2) The lower the metabolism of an organism, the longer it will live. As in if you starve yourself you will live longer, there is lots of research in this field. In simple terms it is due to faster metabolism --> faster cell division, and faster cell division mean you start snipping useful genes in DNA quicker, which of course means quicker death. Japan has a very low calorie diet, only 3.5% percent of Japanese population are Obese (vs 27.7% in USA)... And Japan is also a country where physical activity is not very stressed, which can quite effectively show how they little they eat calorie wise. Due to the biology stated above, they live longer. This is 90%+ of the reason for the aging population, no buts, I have studied this topic extensively, and from what I can tell it's almost a fact in the scientific world. There are minor deviation in healthcare systems, primary food that is eaten (rice vs bread vs potatoes), amounts of meat eaten, etc. But at the end of the day, the main cause is point #2, and that can be attributed to several factors like culture/history, geography (fish vs lots of land), etc. The lower calorie count (compared to average American diet) is true, but Japanese people don't starve themselves, their diet of veggies and pulses contains a lot of fiber which helps keep them full. | ||
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Nyxisto
Germany6287 Posts
On December 30 2014 17:01 Sub40APM wrote: Which is why gold promoting websites like zerohedge have a particularly, almost Korean-channeling the OP of the thread need to 'prove' Japan is doomed. Whats been happening in Japan for now 30 years no one has actually been able to explain well at all. No economist at all. Japan is literally breaking macro text books on the monetary side. With all monetary theory aside I think one can make the observation that whatever it is that Japan has been doing, it is not working very well. The OP doesn't need to proof anything. It's the economists that need to show why their models are not working for Japan. On December 30 2014 15:44 Banaora wrote: No they don't have to increase taxes or something similar. They could alternatively just print the money they need to repay their debt. Well why doesn't every government just print all their debt away instantly and we're all happy? | ||
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oneofthem
Cayman Islands24199 Posts
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Sub40APM
6336 Posts
On December 31 2014 01:13 Nyxisto wrote: With all monetary theory aside I think one can make the observation that whatever it is that Japan has been doing, it is not working very well. The OP doesn't need to proof anything. It's the economists that need to show why their models are not working for Japan. They done a bunch of different things. The idea that they've been doing the exact same thing is false. In the 90s when the government tried to do stimulus the BoJ would do contraction moves. Most recently when BoJ tried to do stimulus Abe raised taxes. Lets not move the goal posts here though, the claim that 'if Japan doesnt raise its taxes now then it will go bankrupt' is just wrong -- the bond market fundamentally disagrees with it and has for the last 20 years. | ||
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RvB
Netherlands6269 Posts
Is there any particular reason why it would affect Japan more than NL? Edit: while Abe increased a tax he's also loosening fiscal policy tot say he's doing the oppositie of the central bank isn't true. | ||
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oneofthem
Cayman Islands24199 Posts
the link between the tax and the result, -2% quarterly contraction on -5% domestic consumption, is very strong. you are going off theory but here we have empirical data, and data > theory. | ||
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T.O.P.
Hong Kong4685 Posts
A better idea would be to encourage Japanese students to study abroad do they know how to sell products outside of their home market. Worked well for the Koreans. | ||
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RvB
Netherlands6269 Posts
On December 31 2014 05:58 oneofthem wrote: it's a pretty substantial increase, with a further increase to 10% written into law at the time the 8% increase was made. there's psychological effect to it, and with already stagnant income making people poorer and letting them know about it too led to a spiral. it also works with a deflationary spiral to depress spending and investment. various articles on this you can google the link between the tax and the result, -2% quarterly contraction on -5% domestic consumption, is very strong. you are going off theory but here we have empirical data, and data > theory. Do you have a source for that? All those reasons except the further increase to 10% were also the case in NL. In fact we had the tax increase while we were in a recession caused by our housing market and our government had an austerity policy. I'm not just going off theory I'm going off my experience closer to home. Anyway I'm not doubting the effect it had the quarter before and after the tax increase. Since consumption was a lot higher before as well so a dip after it is only expected. What I don't really believe is that it's still causing a sluggish economy now considering all his other fiscal stimulus. | ||
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Taf the Ghost
United States11751 Posts
The Japanese economy is screwed, and has been since the 90s, but there's a difference between being stuck in the doldrums for the next 20 years and complete collapse. We're not looking at an event like Russia post-Soviet break up or some of the other, historical collapses. Side point: Hyper Inflation is a political, not economic, event. The economic event is actually a functional bankruptcy, it's that hyper-inflation is a route taken to achieve it. What the Japanese are up to, whether they realize it or not yet, is simply a partial default on Government Bonds. Which, considering in roughly 5 years that Bank of Japan will own everything short of 30s (and most of those as well), will land Japan in a weird area. The "damage" of a default, by a government, is normally the loss of access to capital markets. However, the BoJ is part of the "majors" (i.e. they are in the "club" as far as the Central Banks are concerned) and the only thing that would really happen is news stories. And maybe some investor perception. But the actual damage of 200% of GDP in misallocated resources has already been done. That's simply what we are seeing, now, and have been for the past decade. Everything that's happened as a result of the tax increase and other changes are simply blips on 25+ years of policies that haven't worked. The unfortunate issue is that Europe and America are playing down the exact same path. That's the biggest worry. On the fundamental aspects of the Japanese economy, the main issues are this: http://www.tradingeconomics.com/japan/employed-persons Set the Left-hand scale to 1990 or earlier. The Employed population peaked in 1998. It's been on a slow decline since. Which also means there's less & less young employees, which is really important, as the younger set drives productivity growth. So growth is expected, on net, to be stagnant from here out. (Even if there's a bump in the total income of those still working, in a "flat net growth" environment. Shrinking populations do odd things to most major statistics) The other issue is always that Japan has to import its Energy and a significant portion of its food. Both are constant drags on the economy, irrespective of other structural issues. So, while Japan its going to blow up, it's going to be stuck in the doldrums for a rather long time to come. There may be a currency crisis, but that's less likely than people thing. There's no true way out of the problem short of a major cultural shift in Japan and 30 years. The "Japanese Miracle" was the weird result of a Debt-fueled Asset bubble and wacky set of currency interactions. It's not coming back. South Korea is in the process of attempting to avoid the same fate. | ||
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coverpunch
United States2093 Posts
On December 31 2014 03:48 Sub40APM wrote: They done a bunch of different things. The idea that they've been doing the exact same thing is false. In the 90s when the government tried to do stimulus the BoJ would do contraction moves. Most recently when BoJ tried to do stimulus Abe raised taxes. Lets not move the goal posts here though, the claim that 'if Japan doesnt raise its taxes now then it will go bankrupt' is just wrong -- the bond market fundamentally disagrees with it and has for the last 20 years. I agree with this sentiment and I think a lot of the commentary on giving Japan simplistic solutions is insulting because it treats the Japanese as if they were too stupid or stubborn to see the obvious and as though they haven't already tried all the textbook solutions. Or they amount to kill the elderly, gut their own culture, and force women to have more babies. | ||
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coverpunch
United States2093 Posts
On December 31 2014 11:57 T.O.P. wrote: No monetary policy is going to change the fact that Japanese corporations are getting their asses handed to them. A better idea would be to encourage Japanese students to study abroad do they know how to sell products outside of their home market. Worked well for the Koreans. The Nikkei is up 8.5% for the year and corporate profits were up from the weakening yen. That doesn't look like having their ass handed to them to me. Your idea of foreign education is a long term plan. The time for someone to learn basic skills abroad, gain experience, then come back to Japan and understand how to meld the new ideas and then to gain the credibility to have anyone listen to them is measured out in decades, probably somewhere between 30-40 years if we are talking about sending out teenagers now. It doesn't fit with your logic of Japan needing solutions far earlier than that. | ||
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AutoEngineer
United States97 Posts
Most Japanese companies (except a minority) have their manufacturing overseas like Thailand and Vietnam. Furthermore, I'm not sure what some of you are thinking when you say it wasn't really Japan's lost 2 decades bla bla bla. Yes from the 1990s until now, Japan's economy has been stagnant with barely (if any) growth. How is this not bad? Real wages have dropped, savings rate has turned negative, quality of life is falling. The Japanese are just beginning to feel the effects of all this, on top of more expensive electricity, higher costs of living in general. Japanese people are more and more reluctant to spend, not just because of low inflation but also because they are struggling to buy what they want. The Fukushima nuclear disaster has drastically lowered the quality of life of Japanese, however these are not factored into quality of life measurements. This is because the world is very pro-nuclear power due to General Electric and Co. These gangsters will do anything to lobby the bodies which conduct quality of life measurements and compile statistics to make it seem that nuclear accidents don;t do much to health and quality of life, when it actually does. Fukushima and Chernobyl are two nuclear disasters which should never be forgotten. It's very sad to see that the majority of fish in Japan are probably heavily contaminated with nuclear radiation but fish is a staple in the Japanese diet. Yes, the economy matters less, health and quality of life matters much more than the economy. | ||
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