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Japan Falls into Recession

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Re: Japan Falls into Recession

#51

Post by ekianjo »

jusben1369 wrote: post #41
efjhewjfnkew wrote: post #3

Here's the thing: you actually need a strong middle class to buy your products. No amount of artificially inflating the value of the stock market through quantitative easing will give you a healthy economy. QE is like putting a fresh coat of paint on a house with a rotten interior: it makes things look pretty, but the structural integrity of the building is almost non-existent. Employees working themselves to death f…

You only have to look at the US and Euro economies post 2008 to see the real world benefits of QE. Europeans went down the austerity route and are stuck with consistently underperforming economy and the threat of deflation. The US has turned the corner and is a job creating machine again including the first real signs of inflationary pressure through rising wages. The most unusual thing I can see about Japan is it's…

> Deflation tells consumers not to buy as you wait 6 months and it'll be cheaper.

I live in Japan for many years and I have never seen such thing as deflation here. Prices have remained stable for most items or have increased a little bit. The idea that stuff becomes cheaper as you wait is ludicrous in Japan.

Re: Japan Falls into Recession

#52

Post by rrggrr »

lovemenot wrote: post #47
rrggrr wrote: post #19

Demographics. Fukishima. China. Japan faces enormous challenges. Aging population means increased healthcare costs supported by a (temporarily) declining workforce and decreased tax revenues. Fukishima's costs are incalculable but impact broadly healthcare, manufacturing, farming and fishing. Much Japanese manufacturing has moved to China and adding to that expense is Japan's need to increase its defense spending to…

These challenges are indeed real and enormous, as you point out. Nevertheless, we should also keep in mind Japan's proven ability to utterly transform itself in a short time. Meiji and post-WWII are two precedents. Each of these change events required the following conditions: - clear development model to proceed towards - external pressure creates (perceived) existential threat Such conditions do not pertain in Japa…

It will be about 10 years before, demographically speaking, Japan can literally work its way into growth. Others have posted about the country's reluctance to embrace immigration and I'm afraid that is the necessary transformation unless they can find a way of innovating or enhancing productivity on a massive scale.

Re: Japan Falls into Recession

#53

Post by ekianjo »

jusben1369 wrote: post #41
efjhewjfnkew wrote: post #3

Here's the thing: you actually need a strong middle class to buy your products. No amount of artificially inflating the value of the stock market through quantitative easing will give you a healthy economy. QE is like putting a fresh coat of paint on a house with a rotten interior: it makes things look pretty, but the structural integrity of the building is almost non-existent. Employees working themselves to death f…

You only have to look at the US and Euro economies post 2008 to see the real world benefits of QE. Europeans went down the austerity route and are stuck with consistently underperforming economy and the threat of deflation. The US has turned the corner and is a job creating machine again including the first real signs of inflationary pressure through rising wages. The most unusual thing I can see about Japan is it's…

> Yet they go into this with a massive amount of debt already so are raising consumption taxes at the very time they need consumption

The Japanese government needs to cut deep in spending, and that's what they have NOT been doing for the past 20 years. As long as they don't try to fix the debt problem, nothing else is going to work in the long term.

Re: Japan Falls into Recession

#54

Post by ekianjo »

mc32 wrote: post #4

Quantitative easing, Yen depreciation... What they need to do is figure out a way to grow the population locally or through large-scale immigration. I'm afraid this is the fate that awaits the developed world (or countries with low population growth). Japan is like a canary in the mine of post-industrialism. It'll be interesting to see what they figure out for their society and the lessons they might have for us.

> It'll be interesting to see what they figure out for their society and the lessons they might have for us.

What makes you think they will find a "smart way out" of the situation ? Japanese politicians have been incapable of handling pressing issues for years. They just care about the next elections, as usual. Since no-one expects any drastic change of political climate to happen soon, it's more likely that Japan goes in the wall.

Re: Japan Falls into Recession

#55

Post by maky »

deancutlet wrote: post #31
deciplex wrote: post #24

Earlier quoted context omitted.

It's often suggested that Koreans in Japan are somehow deprived of Japanese citizenship. This is not true. Rather they are not allowed to naturalize in Japan while retaining their Korean citizenship (yes, I realize that is not the whole story and there is a lot of history there - nevertheless, there is nothing stopping a Korean who has lived in Japan long enough, or was born there, from acquiring Japanese citizenship…

It is the same for the US. People that naturalize are "required" to sever citizenship they hold with other nations. However, many people fail to follow through and notify previous host nations.

That's not true. US citizens can have dual nationality. http://travel.state.gov/content/travel/english/legal-conside...

Re: Japan Falls into Recession

#56

Post by toomuchtodo »

bpodgursky wrote: post #27
mc32 wrote: post #4

Quantitative easing, Yen depreciation... What they need to do is figure out a way to grow the population locally or through large-scale immigration. I'm afraid this is the fate that awaits the developed world (or countries with low population growth). Japan is like a canary in the mine of post-industrialism. It'll be interesting to see what they figure out for their society and the lessons they might have for us.

Large scale immigration is just passing the buck down onto a currently-poorer country. But poor countries aren't going to stay human-meat factories forever, and sooner rather than later someone is going to have to figure out a way to maintain an industrialized society with a stable population.

The end of consumerism, less income inequality, and automation.

I must just not understand. It seems pretty simple.

Re: Japan Falls into Recession

#57

Post by ekianjo »

dimitar wrote: post #43

Here is the common ground and controversy between most economists on the situation, I think it is interesting how much common ground there is: The common ground: * The government of Japan faces budget constraints; it cannot tax more than a certain amount and that includes seigniorage (taxing using inflation). * Right now Japan doesn't seem to be immediately close to those constraints since interest rates and inflatio…

> Additionally Increased GDP will bring more revenue

The thing is with the current policy you won't get much increased GDP. Prices are going up in Japan now, which will lead to decreased consumption, decreased savings (or maybe actually an increase in savings vs spending if Japanese feel the worst is yet to come) and negatively impact GDP.

Wherever it's going, it's not good anyway.

Re: Japan Falls into Recession

#58

Post by mc32 »

toomuchtodo wrote: post #56
bpodgursky wrote: post #27

Earlier quoted context omitted.

Large scale immigration is just passing the buck down onto a currently-poorer country. But poor countries aren't going to stay human-meat factories forever, and sooner rather than later someone is going to have to figure out a way to maintain an industrialized society with a stable population.

The end of consumerism, less income inequality, and automation. I must just not understand. It seems pretty simple.

Right, but point me to a society that's been able to make that work. The formula has yet to be cracked.

Re: Japan Falls into Recession

#59

Post by JamesBarney »

dimitar wrote: post #43

Here is the common ground and controversy between most economists on the situation, I think it is interesting how much common ground there is: The common ground: * The government of Japan faces budget constraints; it cannot tax more than a certain amount and that includes seigniorage (taxing using inflation). * Right now Japan doesn't seem to be immediately close to those constraints since interest rates and inflatio…

While I think your post for the most part did a good job of summing up the issues I am a little confused by the following.

"Default and excessive inflation can be a result of too much expansionary policy."

While I understand how too much expansionary policy can lead to excessive inflation, I'm curious how it can result in a default.

Re: Japan Falls into Recession

#60

Post by unclebucknasty »

jusben1369 wrote: post #41
efjhewjfnkew wrote: post #3

Here's the thing: you actually need a strong middle class to buy your products. No amount of artificially inflating the value of the stock market through quantitative easing will give you a healthy economy. QE is like putting a fresh coat of paint on a house with a rotten interior: it makes things look pretty, but the structural integrity of the building is almost non-existent. Employees working themselves to death f…

You only have to look at the US and Euro economies post 2008 to see the real world benefits of QE. Europeans went down the austerity route and are stuck with consistently underperforming economy and the threat of deflation. The US has turned the corner and is a job creating machine again including the first real signs of inflationary pressure through rising wages. The most unusual thing I can see about Japan is it's…

>You only have to look at the US and Euro economies post 2008 to see the real world benefits of QE. Europeans went down the austerity route and are stuck with consistently underperforming economy and the threat of deflation.

I don't think it was a comparison between austerity and QE that was on display. If anything, it's more a comparison between a Keynesian approach and austerity (even given the relatively anemic Keynesian implementation on which we settled). But, even that is not a fully valid comparison.

More to the point, austerity just seemed an insanely bad choice, and I am not sure that it is illustrative of QE being a good choice.

QE was more a boon to the stock market than anything.

Likewise (and ironically), the record profits that companies are realizing is due to automation and increased productivity--two things that are largely responsible for the stubborn unemployment that has actually dogged a broader recovery.

To my mind, the jury is still out on QE and, for that matter, on the sustainability of this "recovery" in the long run.

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