Really? Then can you explain to us why the Japanese government is the highest indebted government among any industrial nation as percentage of GDP? And can you explain why total household savings are the highest in the world among Japanese consumers? If you do not see any stark contrast then I cannot further help...
You are playing with rhetoric here. Fact is that Japanese government debt is the highest among any industrialized nation and Japanese household savings on the other hand are the highest in the world among large nations. We can talk about the philosophical implications (well, I rather not...) but let's keep things fact based. You fail to understand that there is a huge disconnect between government/politics and the average person on the street, more so than anywhere else I have ever lived at. That is not an excuse and yes you are right in saying that ultimately the simple worker will have to should the repayment of debt when it all trickles down, but let's still make a clear distinction between facts and fiction in terms of economic numbers. I am in agreement with you here, like I have said before. However, all these things you're talking about are very difficult, as demonstrated by the fate of previous reformers like Koizumi. You clearly fail to understand the complexities of genuine political reform. Moreover, you're missing my point again. I am not saying that monetary policy is or is not going to work. All I am trying to say is that it's an attempt to wake up the Japanese public and the vested interests and make them aware that the country is, in fact, circling the drain. That might make the crucial structural reforms actually possible. Circling the drain? You must be understating. BOJ and Abe have pushed the hour of awakening just light years forward. Can you again remind us what all the fiscal intervention acts and BOJ actions to stimulate the economy over the past 15 years have brought the Japanese economy? Precisely nothing, so saying this is an experiment that has never been tried before is factually simply incorrect. Maybe not to the current extent of easing but certainly sufficiently large to show positive results if it would have ever proven to work. It did not! What BOJ is doing and you suggesting and supporting is giving a crystal meth addict money to go an afford the best clinic there is to detox. 5 minutes later the patient in question will ring up his dealer to buy more drugs. Why? Because you have not equipped the addict with solutions, alternatives, and ways to operate after detoxing. A new way of life is not palatable because the addict has no knowledge of how to pull himself back up. No fresh thinking, no hope, no aspirations. This 100% translates over to the Japanese economy. Name me more than a dozen N225 companies that are truly at the forefront of research and development in their respective industry, meaning, technologies that will most likely pay off huge in the foreseeable future. There are hardly any such companies because most of such firms' boards and upper management seats are hogged and occupied by backward oriented, lazy, unimaginative, risk-awerse, people who are in the worst equipped to lead a company against the ever growing Chinese competition. China WILL produce Lexus quality level cars in 10-15 years, it is not a question of if but a question of when and whether they will deliver even way before 10-15 years. Just one out of 2 dozen examples I could come with that would completely stifle any of the remaining Japanese strongholds. Forget monetary and fiscal policy. And just because something is difficult to tackle means we should not do so? Japan's net debt interest costs are 1.4% (as of 2013), due to the large cross-holdings of debt. The gross number that you probably refer to are rather misleading. And yes, payments are not included in the primary deficit, since that's the definition of the term. The reason for the use of the "primary deficit" as a target is simply that it's the first step towards a long-term goal of reducing the headline numbers. Japan's 2014 debt interest payment is 257 billion USD, Japan's GDP in USD terms is 4770 billion. That comes out to be at around 5.4% (interest payment alone). The 2014 budget deficit is estimated to be 150 billion USD equivalent. (I converted all into USD to make the numbers more easily understood). So, you are hugely understating debt interest payments. And it highlights my point that Japan saying that it plans to balance its budget by 2020 and stating it does not include debt interest payments is ridiculous. Interest payments at the moment make up almost twice the total government deficit. This is what you got by following your recipe, which is to inject trillions of yen into a deadbeat economy, either on the fiscal or monetary side. We all know what happened with Koizumi, so, quite clearly, Japan doesn't need another Koizumi. What Abe can and cannot do and what I do and don't know about Japan remains to be seen. I think it's fairly obvious that we're going to have to agree to disagree on these points. What happened with Koizumi? He retired!!! He has brought about more action and structural reform than ANY prime minister over the past 30-40 years. What are you talking about? Do you want me to list all the initiatives he pushed through, among others a huge reform of the postal service that many lawmakers and bureaucrats did not want to back . Only someone of his stature would be able to undertake another structural reform. Certainly not the dove Kuroda and weakling Abe. Labor market reform is the most important one in question, including the element of it that has to do with female participation. Again, what actually happens with Abenomics and whether the snap election helps remains to be seen. Forgive me for not being quite as certain about the future as you are. Well in many of your past posts you seem to prescribe monetary stimulus as the all healing medicine. I am certainly a lot more pessimistic than you are. I have witnessed what happened to the trillions of yen spent on fiscal projects. Yet not a single bank has been pressured to clean up their debt laden balance sheets for more than a decade after the bubble burst. Companies were allowed to hire part time jobbers to the brim, robbing any university graduate of a secure income and the ability to plan the future. Good luck placing your hope on the BOJ buying JGBs. How ridiculous, you are moving paper back and forth. The second the Japanese economy comes to grips with labor market reforms, and should structural reforms ever be implemented and bear fruits you will see inflation shooting to the moon. But before that my hunch is that we see USDJPY trading well north of 150 (implying hoped for structural reforms are still far far away). P.S. Do not forget that the Japanese secondary JGB market is currently literally non-functional. The slightest distortions or volatility injected into Japan's fixed income markets may in all actuality lead to distortions that I am not able to predict their implications. Certainly it makes for some nice ripple effects into semi-govis, prefectural debt, as well as corporate debt. We are all waiting for the show to go down...but hey, you are the fixed income expert, you most likely know a lot better whats going on in this area.
Volpunter. You and Martinghoul have much to say that i want to read and consider. If you can avoid red type it would be appreciated. It hurts my eyes and I find it hard to read. Thank you for sharing your insight of the situation in Japan.
At this moment no, but there is a connection, and I thank you for giving me food for thought. Are you quoting gross savings or net savings?
Well, we're going to have to agree to disagree here, I guess... In fact, some of the things that you say, I would actually agree with. However, your other statements are just outlandish. I just can't muster the will to discuss this ad infinitum at the moment.
KURODA: GREAT INTEREST IN WAGE, PRICE SETTINGS THROUGH SPRING Abenomics Split Seen in ETFs as Nikkei Favored Over Topix In Shinzo Abe’s Japan, corporate profits and the stock market are surging while household income shrinks with the economy. Investors are acting like they expect the divergence to grow. They plowed $776 million into securities tracking the Nikkei 225 (NKY) Stock Average and JPX-Nikkei Index 400 (JPNK400) last week, while pulling $417 million from exchange-traded funds following the broader Topix index, data compiled by Bloomberg show. The Nikkei 225, dominated by exporters with an average market value five times larger than Topix constituents that include small retailers, is the world’s second best-performing equity gauge since the central bank’s stimulus boost on Oct. 31 dragged the yen to a seven-year low. Amundi Japan Ltd. and Mizuho Asset Management Co. say favorable prospects for Japan’s manufacturers amid unprecedented monetary easing contrast with a gloomy outlook for businesses reliant on domestic demand. Prime Minister Abe’s policies are doing less for a populace mostly employed at smaller companies as pay increases fail to keep pace with inflation, concerns that may be holding back the Topix. (TPX) “Large-cap companies with offshore business benefit from a weaker yen, and that makes the Nikkei 225 more attractive,” said Masanaga Kono, a senior strategist at Amundi. “Compared with that, we can’t expect much from the Japanese domestic companies, which carry a bigger weight in the economy.” Outflows from Topix funds last week were the biggest among 96 indexes on which Japanese ETFs have been built, followed by funds following the MSCI Japan Index hedged into euros and ones tracking the Topix Total Return Index, data compiled by Bloomberg show. Abe Flows The Topix rose 0.6 percent to 1,409.15 today, its highest close since June 2008, while the Nikkei 225 advanced 0.3 percent to 17,407.62. The yen traded at 117.91 per dollar after touching a seven-year low of 118.98 on Nov. 20. Stock markets were closed yesterday for a holiday. Since November 2012, when elections were called that brought Abe to power, investors put 378 billion yen ($3.2 billion) into Nomura Holdings Inc.’s Nikkei 225 ETF (1321), the largest tracking the gauge, according to data compiled by Bloomberg. They invested 299 billion yen in Nomura’s Topix fund, the data show. Both underlying stock gauges have roughly doubled, making investors $1 trillion richer. Japan unexpectedly slipped into recession last quarter, preliminary data showed last week, as consumers struggled following an April sales-tax increase. Gross domestic product shrank an annualized 1.6 percent in the three months through September, after a 7.3 percent slump the quarter before, the Cabinet Office said Nov. 17. ‘Confidence Game’ “It’s a bifurcation -- the economic outlook doesn’t look good, but stocks are going to go significantly higher,” Arne Espe, the San Antonio-based fund manager at USAA Investments, said by phone. The firm oversees about $66 billion. “It’s a confidence game that they’re trying to play and we think ultimately will end badly. It means the yen is going a heck of a lot lower, which is not good for the average citizen.” Abe, 60, delayed a second planned increase in the sales tax on Nov. 18 and called an early election, seeking to win public endorsement for the decision and his plans to revive the Japanese economy. The support rating for his Cabinet dropped to 44 percent, the lowest since the premier took office, the Nikkei newspaper reported yesterday, citing a poll conducted Nov. 21-23. Just 33 percent of respondents said they supported Abe’s economic policies, while 51 percent said they opposed them, according to the Nikkei. The GDP data don’t mean his Abenomics program -- the three arrows of monetary easing, spending and structural reform -- is a failure, Abe said last week. The BOJ is doing its best to help, unexpectedly expanding its bond-buying program on Oct. 31 and tripling ETF purchases to 3 trillion yen a year. Wage Growth “The companies that benefit are being bought, and those that don’t are being ignored,” Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 39 trillion yen in assets, said by phone Nov. 20. Abe’s stimulus measures “don’t reach the whole economy. We had the first and second arrows. The third one hasn’t been fired and may never be.” While wages in Japan rose by the most in more than six years in September, climbing 0.5 percent from a year earlier, earnings adjusted for inflation still fell 2.9 percent, a 15th straight monthly drop. Brokerages, appliance makers and tire manufacturers led Topix gains under Abe through last week. The index has 1,825 constituents with an average value of $2.3 billion. In the Nikkei 225, the average company is worth $12.2 billion. Fuji Heavy Industries Ltd., the maker of Subaru cars, and Mazda Motor Corp., which gets 76 percent of sales outside Japan, climbed the most. NT Ratio The Nikkei 225’s closing price was 12.5 times that of the Topix on Nov. 13, the highest level for the measure known as the NT Ratio this year, amid foreign buying of Japanese stocks. Investors outside Japan poured 3 trillion yen into the nation’s equities in the four weeks through Nov. 14, finance ministry data show. For many overseas investors, the Nikkei 225 is the primary benchmark for Japanese equities. Central-bank buying also favors the Nikkei 225: more than half the BOJ’s ETF purchases will go into funds tracking the gauge, according to Tokai Tokyo Securities Co. Another equity gauge, the JPX-Nikkei 400, is luring flows away from Topix ETFs as it outpaces the other two benchmark measures this year with a 8.6 percent rally through last week. The BOJ last month made funds tracking the newer measure eligible for its ETF buying. Mizuho Securities Co. says as much as 900 billion yen of this may go to the JPX-Nikkei 400 every year. ROE Focus The JPX-Nikkei 400 is an experiment backed by Abe’s Liberal Democratic Party in using a stock index to promote company strategies that boost return on equity. The measure had attracted about 230.3 billion yen in four ETFs as of Nov. 19. “In this second round of Abenomics, there’s unlikely to be an influx of funds because of economic-growth policies, so the focus will be on improved governance at companies,” said Seiichiro Iwamoto, who helps oversee the equivalent of $37 billion at Mizuho Asset in Tokyo. “Instead of money going into the broader Topix, there’ll be a flight to quality. I think that is being seen in ETF flows, with the JPX-Nikkei 400 being a prime beneficiary.” Naoki Fujiwara, Tokyo-based chief fund manager at Shinkin Asset Management Co., which has about $6 billion, says the premier’s policies boost the whole equity market. Under Abe, the Nikkei 225’s 100 percent rally through Nov. 21 compares with 94 percent for the Topix. Earnings Growth A split is more evident in companies’ profit outlooks, according to Daiwa Securities Group Inc. Nikkei 225 companies have an average estimated three-year earnings growth rate of 11 percent compared with 8 percent for those in the Topix, according to analyst forecasts compiled by Bloomberg. Iida Group Holdings Co., a Tokyo-based homebuilder that’s in the Topix and not the Nikkei 225, cut its full-year net income target by 47 percent on Nov. 11, citing a lack of improvement in the disposable incomes of its main customers. In contrast, Toyota Motor Corp., which makes 75 percent of revenue outside Japan, is predicting record profit as a weaker yen boosts the value of high-margin Lexus luxury models and SUVs sold abroad. “Corporate earnings are being pushed up by the large exporters, whereas domestic-reliant companies are struggling,” said Makoto Morita, a strategist at Daiwa Securities. The disparity can also be seen in valuations. The Nikkei 225 traded at 19.1 times estimated earnings last week, compared with 15.6 times for the Topix. On Nov. 14, 2012, the day before elections were called that ushered in Abe’s government, the figures were 14.5 and 13.6, respectively. The Topix Small Index, which excludes the large stocks on the Topix 500 Index, traded below the value of its companies’ net assets. “The large caps are seeing the benefits of Abenomics, but the smaller caps are far behind,” said Mizuho Asset’s Iwamoto. “That should be the focus for Abe’s regime after the election. If the benefits don’t spread from manufacturers into the domestic sector, the show will be over.”
but you could maybe have the guts to admit your numbers were completely wrong? I have shown the calculations and made the efforts to pull out the detailed figures, if you still need factual backup for those figures may I please refer you to the MoF and BoJ websites. Accusing someone to have his numbers wrong and then being corrected by factual backup by the accused and just saying that "you can't muster the will to continue to discuss this" is in my book a pretty bad sport. P.S.: You have so far not once backed up your statements and believes with numbers or examples (quantitatively or qualitatively) in this thread. Of course we can all gather and troll all day or just say what we have to say but I remember you generally backed up your line of reasoning other than "we have not tried this so better to try than not to try [QE]". Just saying I think you can do way better than that.
awesome, all points that benefit the top 1-5% who actually own stocks or corporate interest. Everyone else so far is actually WORSE OFF since Abe came to power. Lower energy prices that subdue inflation does not help anyone in Central Tokyo (who does not use any transportation but trains and public means to get around) but has to pay rising costs of clothing, food, and anything imported. Then you get slapped with a higher sales tax. Welcome to the new normal. No QE nor government supply side intervention will reach the masses ever. That is a proven fact.
As of 2013, using the IMF data here (http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/weorept.aspx?sy=2012&ey=2012&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=35&pr1.y=14&c=512,666,914,668,612,672,614,946,311,137,213,962,911,674,193,676,122,548,912,556,313,678,419,181,513,867,316,682,913,684,124,273,339,868,638,921,514,948,218,943,963,686,616,688,223,518,516,728,918,558,748,138,618,196,522,278,622,692,156,694,624,142,626,449,628,564,228,283,924,853,233,288,632,293,636,566,634,964,238,182,662,453,960,968,423,922,935,714,128,862,611,135,321,716,243,456,248,722,469,942,253,718,642,724,643,576,939,936,644,961,819,813,172,199,132,733,646,184,648,524,915,361,134,362,652,364,174,732,328,366,258,734,656,144,654,146,336,463,263,528,268,923,532,738,944,578,176,537,534,742,536,866,429,369,433,744,178,186,436,925,136,869,343,746,158,926,439,466,916,112,664,111,826,298,542,927,967,846,443,299,917,582,544,474,941,754,446,698&s=GGXWDN_NGDP,GGXWDG_NGDP&grp=0&a=#cs165) the net general government debt figure is 134.3% vs the often quoted 240% gross figure. This difference is particularly large for Japan, which is why I prefer to use the net number. Using the current average duration of 8 years for the outstanding debt provided by the MoF here (http://www.mof.go.jp/english/jgbs/debt_management/plan/e20131224overview.pdf) and the current yield of arnd 35bps for 8y JGB, I arrive at net interest payments which are, in fact, even lower now than the 1.4% figure I gave above. I sure hope this is quantitative enough for you. Finally, let me say that, as far as I am aware, I never accused you of "having your numbers wrong". I said that the numbers you have used are misleading.