I love this thread. All the talk about how Japan was doing just fine, and Abenomics was an "unmitigated success", man, good times. Where, oh where is Martinghoul? Volpunter? Japanese Economy Shrinks, Yen Weakens, Nikkei Soars Over 1,000 Points 15 Monday Feb 2016 Posted by mishgea | February 15, 2016 2:29:32 | Economics ≈ 3 Comments For the 4th time in seven quarters the Japanese economy shrank. It appears Japan may be headed for another recession. In response, Prime Minister Shinzo Abe may double down with his Abenomics policies that have clearly failed. That idea was enough to propel the Nikkei up 1,070 points. Japanese Economy Shrinks Again The Wall Street Journal reports Japan’s Economy Shrinks Again in Fourth Quarter. Japan’s economy shrank again in the fourth quarter, the latest confirmation that Prime Minister Shinzo Abe’s growth program is sputtering. The contraction, the fourth in seven quarters, comes at a crucial time for the prime minister’s economic policy program, known as “Abenomics,” and could lead to calls for further monetary and fiscal stimulus. After Mr. Abe took office in late 2012 declaring that “Japan is back,” economic growth has been intermittent and wage increases have been negligible. In addition, the primary gauge of inflation is languishing around zero. The main cause of the slowdown in the fourth quarter was a decline in consumer spending, according to the government. Private consumption fell 3.8% on an annualized basis. Unseasonably warm weather likely caused people to buy less winter clothing, while sluggish wage growth also kept pocketbooks closed. Japan’s consumers have been tight fisted since a sales-tax increase in April 2014. Paychecks failed to keep pace. Including the effects of inflation, wages fell 0.9% last year. Exports unexpectedly fell during the latest quarter, by an annualized pace of 3.4%. Slower sales of smartphones in China sapped demand for equipment in Taiwan and South Korea. Shipments of mining equipment to the U.S. also slumped as companies shelved shale-gas projects because of depressed oil prices. Japanese GDP Yen vs. US Dollar The Yen is off just a tiny bit over the past few sessions, weakening from 110.98 per dollar to 113.72 to the US dollar. The weakening Yen and prospects of another Japanese recession, coupled with the likelihood of more failed Abenmomics was enough to send the Nikkei soaring. Nothing succeeds like repeated failure. Mike “Mish” Shedlock
The markets, investors and Japanese exporters cheered Abe for his efforts, but Abenomics’ long-term risks and threats were always evident. Three years of manipulating fiscal and monetary forces did much damage to the country’s GDP. In August 2015, signs of the economy heading for its fifth recession in six years became clear. In July- September quarter last year, Japan’s economy shrank an annualised 0.8%, confirming market predictions that the country was relapsing into a recession. Monetary easing measures under Abe’s reign have focused at boosting liquidity and spurring a devaluation of yen. The immediate outcome of buying much of the available government debt with newly-created currency has been that BoJ’s balance sheet has tripled. Also, when it comes to revitalizing GDP levels, Japan has been an idler amongst Asian economies when compared to EMs with positive growth like China and India. According to IMF projections, Japan is expected to grow by 0.6% in 2015, whereas China and India’s 2015 forecasts stand at 6.8% and 7.5% respectively. In its World Economic Outlook, the world organization stated that a sluggish consumption, combined with weak “momentum in real wages” will only ensure a modest revival in growth for Japan. Abenomics may have done well in terms of aiding the financial markets, but it has eventually had a dampening effect on the real economy. Rising government debt and declining GDP signify a probable slowdown. And, this slowdown can spillover and have a lasting impact on a country with a record 33.8 million people over the age of 65. Source: http://multi-act.com/japans-abenomics-real-or-unreal/
As I mentioned in another thread, no help necessary. Just referring back to your original "Abenomics is an unmitigated success" comment with entertainment and amusement.
Previously I've posted in the (https://www.elitetrader.com/et/threads/japan-spirals-into-bankruptcy.181522/) thread. However "spirals into bankruptcy" implies a JGB bond default, and this is not my view. **** "Japan - It's Finally Happening" http://themacrotourist.com/macro/its-finally-happening This article contains some commentary here on the "spike" in 10 year JGB yields above 0.10% http://themacrotourist.com/images/2017/01/LastNightFeb0317.png I'm not short JGBs because I think that the BoJ can (and likely will) continue to buy them in large quantities to keep interest rates low. However I am long gold/JPY. Using Kitco.com prices, it closed on Friday at 137,443 JPY an ounce. .
To be fair, with all the jitters in Europe, I am not even sure I'd feel too confident about JPY. However, JGBs, IMHO, are even worse.