1% Growth! Please to Obey Abenomics Rule!

[Wage Slave]

Oh rats. Seems like the results of doubling the money supply are in:

Some unreformable big companies propped up for another year thanks to stimulus spending
Yet more debt
Stock market up by 50%
Measly 1% annual growth
Large and persistent balance of trade deficit due to huge purchases of energy and sluggish exports

And spending by ordinary folk is expected to dip after the first sales tax increase. Actually it could dip sharply as real incomes fall. Only one thing for it:

Shovel more money to the usual and big suspects
Restart all nuclear power stations now
Make bold statements and confident predictions
Death to unbelievers

Japan's economy grew less than expected last year, countering forecasts it would benefit from a jump in spending ahead of a sales tax increase in April. Gross domestic product rose by 1% on an annualised basis in the three-month period to December, compared to market estimates for a 2.8% expansion. This was due to weaker private consumption and capital spending, as well as lower export figures.

The latest figures highlight questions about the sustainability of Japan's economic recovery, and whether the government's policy of 'Abenomics' is working.

"The disappointing GDP result is a reflection of the limit of Abenomics," Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo said.
"Fiscal stimulus and monetary stimulus can only do so much without the actual change in the competitiveness of Japanese economy.

http://www.bbc.co.uk/news/business-26222281

[legion]

Stock market up by 50% on 1% growth

So where did the other 49% come from?

And more to the point, where has all the money gone?

Across the road from where I work there are some plush new apartments inhabited by nouveau riche rent payers. Basically loose money which is bankrolling someone else's loan.

[Wage Slave]

And the good news continues. And Mr Abe says "Japan is back!" and "Wage surprise in April!". The complete avoidance of reality is disturbing to say the least. Things are going to happen. My money is on accelerating inflation and a plummeting exchange rate with the kicker that even a very weak Yen won't help until all the nuclear power stations are put back on line. Buying all that energy mops up far more money than Japan can make from exporting more stuff these days. Great. Accept that the monopolistic electric companies go back to business as normal or face economic collapse and soon.

Japan's monthly trade deficit has more than doubled to a new record after a weakened currency drove up the cost of fuel imports while exports slowed. Japan's trade gap rose by 71% to 2.79tn yen ($27.3bn; £16.4bn) in January from a deficit of 1.3tn yen in December.

This comes after imports rose by 25%, outweighing a 9.5% rise in exports. Japan has posted large trade deficits for 19 straight months, raising concerns the government's stimulus policy may be having a counter effect.

http://www.bbc.co.uk/news/business-26268338

[matsuki]

Well, most of his supporters are probably just as disconnected with reality so we just have another North Korea type situation where their reality is what they are being told.

[Wage Slave]

Well the "Wage Surprise" is with us and they will be dancing under the cherry trees this year! Biggest pay rise in 21 years!

The stoppage in India came just a week after Toyota announced its biggest pay rise in 21 years for its Japanese staff.

The average Toyota employee will earn 2,700 yen ($26; £15) more each month, a 0.8% increase from the year before.

Some workers will also receive about 7,300 yen more each month depending on promotions.

The increases were announced in conjunction with other large Japanese firms such as Panasonic and Nissan as part of a co-ordinated effort by Prime Minister Shinzo Abe to boost wages ahead of a planned tax increase, which is set to come into effect in April.

http://www.bbc.com/news/business-26607962

[matsuki]

Look out now, Japan Inc. just bought you two more drinks a month! Good job!

[yanpa]

Look out now, Japan Inc. just bought you two more drinks a month! Good job!

According to my calculations, 2700 yen will get you a 24 pack of Nodogoshi and leave enough change for hip flask of Nikka Black

[Yokohammer]

Look out now, Japan Inc. just bought you two more drinks a month! Good job!

According to my calculations, 2700 yen will get you a 24 pack of Nodogoshi and leave enough change for hip flask of Nikka Black

Woot ... party time.

Followed by incapacitating hangover and throw-up time.

[Wage Slave]

Not so fast. Remember the price of all that lovely stuff to blot out reality will be increasing by at least 3% as soon as the lucky workers get their surprise plus another 2% ere long and that assumes Abenomics doesn't decide to increase the duty on the opiate of the masses - which it must be odds on to do.

[yanpa]

Not so fast. Remember the price of all that lovely stuff to blot out reality will be increasing by at least 3%

(dons Hat of Pedantry)

A consumption tax rise of 3 percentage points equates to an increase of slightly less than 3% (2.85%-ish if my arithmetic is pointing in the right direction) to the end price. This does not take into account other inflationary effects however.

[Wage Slave]

Not so fast. Remember the price of all that lovely stuff to blot out reality will be increasing by at least 3%

(dons Hat of Pedantry)

A consumption tax rise of 3 percentage points equates to an increase of slightly less than 3% (2.85%-ish if my arithmetic is pointing in the right direction) to the end price. This does not take into account other inflationary effects however.

Yep, I stand corrected because it is 3% of the price before tax, not the price including tax. So fair enough, prices increase very soon by at least 2.85% and if you are a lucky worker at one the biggest and most successful Japanese companies you get a surprise, best in 21 years, pay rise of 0.8% to compensate you. Of course not every company will be able to afford such generosity but for some Abenomics is certainly delivering the goods. And Japan is back! - so time to get on with annoying the Chinese and Koreans a bit more in the name of national pride.

[Russell]

Japan sees more than 1,000 complaints of suspected price-gouging

Japan’s Consumer Affairs Agency has received more than 1,000 complaints of suspected price-gouging since the consumption tax rate was raised from 5 percent to 8 percent on April 1, officials said Thursday.

“Many people complained about price hikes on goods closely related to their daily lives,” said an official from the agency’s Consumer Education and Information Division.

In October last year, the agency opened a special consultation desk related to the consumption tax increase.

Between April 1 and 25 this year, the desk received 1,482 inquiries, of which 1,147 were complaints about suspected unfair price hikes, the officials said.

But the number of complaints has been declining since mid-April, they said.

Many of the complaints were about price increases that exceed the tax hike. One consumer complained that the price of a cup of coffee rose to ¥220 from ¥200.

Others reported that stores changed their price indications to before-tax prices from tax-inclusive prices without adjusting the prices themselves.

More

Actually I saw the opposite. Some prices went down in the beginning of April, like gasoline at some stations. That's because they cranked prices up by the end of March.

Where can I file a complaint?!?

[Wage Slave]

Abenomics is a success then. He promised to deliver inflation and here it is. Now get out there and spend spend spend good folks in the sure and certain knowledge that wages will rise to meet your needs.

Or not, as the case may be. But let's face it - He promised inflation and inflation we have. The wages, well that's for companies to decide. And all those long term bonds now losing money in real terms? Well, buy em back and issue new ones with a slightly higher rate of interest. While we are at at it throw a bunch of money at the usual suspects for dubious infrastructure and aid programmes and to invest in the stock market driving up prices in a sort of self fulfilling prophecy.

Add in underperforming/failing companies, Depopulation, an ageing population, already massive levels of govt debt, more and more competition, the energy strategy in ruins, iffy relations with the neighbours and we could well be looking at the perfect typhoon shortly. Even, off to the IMF, cap in hand.

And if you think I'm just bitter ....

The economy shrank more than estimated in the April-June quarter, revised data showed Monday, piling pressure on the Abe administration to delay another consumption tax hike and the Bank of Japan to expand its stimulus.

The figures will come as a blow to Prime Minister Shinzo Abe as his program aimed at rejuvenating growth struggles to gain traction.

Second-quarter gross domestic product shriveled 1.8 percent from the previous quarter, worse than the previously estimated fall of 1.7 percent, the Cabinet Office said.

The latest statistics confirmed the economy suffered its steepest quarterly drop since the 2011 quake, tsunami and nuclear crisis.

On an annualized basis, the GDP contraction was 7.1 percent, compared with 6.8 percent in the preliminary estimate. That makes it the worst performance since early 2009, at the height of the global financial crisis.

http://www.japantimes.co.jp/news/2014/09/08/business/economy-business/gdp-contraction-revised-to-deeper-than-estimated-7-1/#.VA5FI8KSyis[/quote]

Oh shit ........Hold on tight. Inflation AND sharp economic contraction. God's way of telling you that your economy is totally up shit creek in a 70's (shudder) kind of way.

[matsuki]

Has anyone measured the performance increases due to the がんばれにっぽん sticker campaign?

[Wage Slave]

And another quarter of economic contraction - So we are officially in recession again. Oh dear, oh dear. Stagflation it is then.

Japan's economy unexpectedly shrank for the second consecutive quarter, leaving the world's third largest economy in technical recession.

Gross domestic product (GDP) fell at an annualised 1.6% from July to September, compared with forecasts of a 2.1% rise.

That followed a revised 7.3% contraction in the second quarter, which was the biggest fall since the March 2011 earthquake and tsunami.

http://www.bbc.com/news/business-30077122

And the solution? Call a snap election while the opposition are still in disarray - lock in another 4 years and a mandate to delay the consumption tax rise indefinitely.

Seriously, it is getting pretty hairy. inflation is starting to kick off - ask any housewife. Zillions are being poured in but wages and salaries are stuck fast while the stock market zooms and the corporations simply pile up yet more cash for just being there. And now technically in recession again with the public finances looking dodgier than ever. Oh and by the way, the figure for last quarter's contraction has now been "corrected" to 7.3%.

It's really looking more and more likely we will have to have an IMF rescue and imposed recovery plan and one which will make the UK in the 70's look like a very minor and casualty free operation. Still, as long as everything that happens can be blamed on the rest of the world all is well or wa or something.

[wagyl]

I love the way only one consecutive quarter of contraction allows you to say "well, that is not a recession," and two consecutive quarters of contraction means you can say "well, it is technically a recession," suggesting that it is not really a recession either, only that the technical requirements happen to have been met.

By the way, an IMF rescue seems to give every government subject to it an excuse to blame the austerity on the IMF, i.e. "the rest of the world." IMF rescues seem to follow credit crunches: I'm not sure we are at that stage yet here, although that fact often surprises me. The government always seems to find somewhere to borrow from.

[Wage Slave]

The government always seems to find somewhere to borrow from.

They borrow from people who understand they have to lend. The domestic banks and pension funds. They don't borrow on the market. The average Japanese person has no idea how much of their money has been lent to the government. That's been OK because the massive savings built up in happier times have been available to play with. However, now the savings rate is tiny and the savings built up by the older folks are being withdrawn for one reason or another. A lot of the money printing done over the last two years has been to prop that system up. The government printed new money. They used the new money to buy back their debts from the banks. The banks will then buy newly issued government debt and hand the new money back to the government. Of course the banks are free to pile into the stock market with the money until it is needed to buy new debt. They also get the new debt at a higher interest rate than the old debt.

Everyone is happy and the system staggers on. The concern is that we know there is a limit to how much you can do this sort of thing in a weak economy before inflation runs way out of control. It has happened before here, in Germany, in Zimbabwe and in lots of other countries. If it is really bad the only way out is remonetisation which will mean the value of a lot of savings (and debts) being degraded or even destroyed.

[wagyl]

pension funds

These wouldn't by any chance be those pension funds you are so bullish about, would they????

[matsuki]

If it is really bad the only way out is remonetisation which will mean the value of a lot of savings (and debts) being degraded or even destroyed.

so the cash money under all those futons out there will be safe?

[wagyl]

If it is really bad the only way out is remonetisation which will mean the value of a lot of savings (and debts) being degraded or even destroyed.

so the cash money under all those futons out there will be safe?

I think under the Wage Slave scenario it will be subject to hyperinflation until it has no value, and we have to take a wheelbarrow of banknotes to buy a loaf of bread, like between-the-wars Germany.

[Wage Slave]

pension funds

These wouldn't by any chance be those pension funds you are so bullish about, would they????

No. They would be company and private pension funds. The national pension scheme is another kettle of fish entirely.

[Wage Slave]

If it is really bad the only way out is remonetisation which will mean the value of a lot of savings (and debts) being degraded or even destroyed.

so the cash money under all those futons out there will be safe?

I think under the Wage Slave scenario it will be subject to hyperinflation until it has no value, and we have to take a wheelbarrow of banknotes to buy a loaf of bread, like between-the-wars Germany.

More or less. It might well not get that far. In any case, cash salted away will lose all it's value. That's one of the attractions. Remonetisation means there will be completely new banknotes in circulation.

[matsuki]

If it is really bad the only way out is remonetisation which will mean the value of a lot of savings (and debts) being degraded or even destroyed.

so the cash money under all those futons out there will be safe?

I think under the Wage Slave scenario it will be subject to hyperinflation until it has no value, and we have to take a wheelbarrow of banknotes to buy a loaf of bread, like between-the-wars Germany.

Might be more valuable to burn as firewood

[Tsuru]

The speed at which the BoJ is now printing toilet paper to ostensibly backstop deflation is starting to look like that guy removing the control rods from Chernobyl #4 because output was not as expected.

People keep telling me to hold on to my Yen but I'm not so sure anymore.

[Wage Slave]

I still think that there is sufficient underlying strength, overseas earnings and unexploited potential to weather the storm. However, it will mean making some fundamental changes notably in opening things up, getting rid of a lot of protectionism and allowing some of the zombie companies to go to the wall. That will create pain in the short term for everyone and there will be losers from that. Wagyl is right about countries always finding it easier to do if you can blame painful restructuring and cuts in government spending on the IMF.

Remonetisation is a worst case outcome and not the most likely. Devaluation, tax rises and cuts on government spending are likely but won't produce anything except more recession unless the structural changes are made at the same time. That isn't easy or all that quick and damages a lot of entrenched interests - hence a real crisis and IMF compulsion are often essential.

I wouldn't recommend having all your savings in Yen at this point. It's always a good idea to spread risk around a bit anyway.

[wagyl]

pension funds

These wouldn't by any chance be those pension funds you are so bullish about, would they????

No. They would be company and private pension funds. The national pension scheme is another kettle of fish entirely.

I'm tempted to say O RLY???? On what do you base that belief? On your trust in our political masters to do the right thing by us all?

In my view, if the shit gets within even ten feet of the fan, the national pension membership is not going to be a protected class. It is far too easy to change the rules as it is -- make you wait until you are another five years closer to death before you start receiving, deduct an amount for senior's health insurance...

[Wage Slave]

pension funds

These wouldn't by any chance be those pension funds you are so bullish about, would they????

No. They would be company and private pension funds. The national pension scheme is another kettle of fish entirely.

I'm tempted to say O RLY???? On what do you base that belief? On your trust in our political masters to do the right thing by us all?

In my view, if the shit gets within even ten feet of the fan, the national pension membership is not going to be a protected class. It is far too easy to change the rules as it is -- make you wait until you are another five years closer to death before you start receiving, deduct an amount for senior's health insurance...

The trouble is your view doesn't accord with the historical evidence and isn't really rational. National pension schemes have been and will always be just about the last thing to go - for a variety of very good reasons. Private savings schemes of all kinds have always been far more iffy.

[matsuki]

making some fundamental changes notably in opening things up, getting rid of a lot of protectionism and allowing some of the zombie companies to go to the wall. That will create pain in the short term for everyone and there will be losers from that. Wagyl is right about countries always finding it easier to do if you can blame painful restructuring and cuts in government spending on the IMF.

This needs to happen...sooner than later.

[wagyl]

pension funds

These wouldn't by any chance be those pension funds you are so bullish about, would they????

No. They would be company and private pension funds. The national pension scheme is another kettle of fish entirely.

I'm tempted to say O RLY???? On what do you base that belief? On your trust in our political masters to do the right thing by us all?

In my view, if the shit gets within even ten feet of the fan, the national pension membership is not going to be a protected class. It is far too easy to change the rules as it is -- make you wait until you are another five years closer to death before you start receiving, deduct an amount for senior's health insurance...

The trouble is your view doesn't accord with the historical evidence and isn't really rational. National pension schemes have been and will always be just about the last thing to go - for a variety of very good reasons. Private savings schemes of all kinds have always been far more iffy.

It looks like we agree to disagree, and that is perfectly OK: after all, neither of us is forcing the other to invest in a scheme we do not ourselves trust. I will just make two comments: historical evidence

The first is that the age at which people become eligible for the state pension is going up incrementally from 60 to 65. In April 2013, the age at which men can start to claim their pension will rise to 65 for the flat-rate component, and to 61 for the earnings-related component ... Against this background, the Ministry of Health, Labor, and Welfare, which oversees both employment policy and the pension system, is looking into the possibility of raising the age at which people start to receive their pension to somewhere in the region of 68 to 70.

http://www.nippon.com/en/column/l00009/ (not a primary source, but a convenient summary)

The second piece of historical evidence, not in English unfortunately, is the Later Old Age Health System, initiated in 2008 as an additional health insurance, over and above the usual health insurance, paid by those over 75. The way they collect the insurance premiums is by making a deduction from the pension benefits. This is a real shape-shifting animal: view it from one side and it is a reasonable way to make old people pay for the fact that it costs more to maintain their health (although it is just as reasonable to make us all share the burden: it is a political decision in the end), look at it from another angle and it is a way to reduce their pensions.

My second comment is that, while I fully understand what you are saying about the dichotomy between emotional response and rational argument, I don't think any of us can put much trust in rationality, trust that a rational decision will be made for us, in the event of a crisis, when any and all proposals are on the table. And in the end, it is much easier for the government to break the "social contract" between us than it is for the citizenry.

Anyway, let's wish each other a long life with prosperity to the end.

[Wage Slave]

Anyway, let's wish each other a long life with prosperity to the end.

Absolutely. And that wish is all the stronger because we live under a market driven system which makes the all outcomes possible and very little predictable. I have laid my bets and you, yours - and that's all either can do. Time will tell and of course I wish you well.

I like to place my bets across a fairly wide range of instruments as a way of mitigating risk. Others take a more focussed view and sometimes do far better. I am not going to spend a lot of time searching for evidence but doubt there is a single instance of a half respectable government failing to maintain the national pension scheme, in some form or other, through thick and thin. On the other hand there are numerous examples of market based schemes collapsing, paying far less than they promised and being looted by the company that set it up for their workers.

I am categorically not saying that a national pension scheme is the answer to having a decent retirement income. I am categorically not saying they are perfection. What I am saying is that they are arguably a valuable and relatively very low risk component of your portfolio. Compared to equivalent products from the private sector they are well worth buying. I have yet to see any competent financial advisor or expert advocate attempting to evade being a part.

It is also the law that people contribute to it. There is some justification in a nation that has a social security system. If people refuse to contribute for whatever reason and then find themselves impoverished later then the taxpayer (ie the rest of us) has to find resources to replace their pension. That's not fair is it?