Japan unveils record budget to boost economy… The international fiat paper system is groaning and creaking.
Any one care to comment or shed light on this?
Japan was stuck in a deflationary spiral for years after its economic bubble burst in the early 1990s, hitting corporate earnings and prompting consumers to put off purchases in the hope of getting a lower price.
I don’t remember where I read it, but I remember reading a short piece in some mainstream publication on how the Japanese were rivalring Americans in consumption. Obviously, this comparison was not statistical, simply that there were a great many Japanese shopping for “high-end” products (like designer clothing). These must have been the stupid Japanese, who weren’t waiting for a lower price.
Prices in Japan for everyday consumer goods, food, etc. seem to have been almost totally flat for the past 10 years or more. Cost of living has remained flat as long as I’ve been here. The only thing I see falling is electronics prices, as they have everywhere.
Prime Minister Yukio Hatoyama was elected by promising to increase budget spending: he’s just delivering the goods. As usual my bet is that this mountain of money will increase GDP in the short term (2-3% next year?) but won’t help a tiny bit improving what is potentially the most dangerous economical situation on the planet.
It also remains to be seen if Hatoyama will be able to reverse four worrying trends that are threatening his country. First is the recent reluctance by the Bank of Japan to buy “toxic” assets as it used to. Second is the reluctance of the Japanese public to keep buying bonds. Third is the steady and alarming decline in saving rates among Japanese people. Fourth is the “population bomb”: Japan is the only country in the world (excluding those at war of course) whose population has actually declined in the past decade. Not only that but with a steadily declining workforce and an increasing number of elders receiving retirement benefits and health care for free (and we all know how what’s the life expectancy of the Japanese people) from the State is scenario is quickly becoming “nightmarish”. As I am convinced that Egypt is the potential “big bomb” in the world as far as religious extremism and social tensions are concerned, I am also convinced that Japan is the potential “big bomb” as far as economics are concerned. There are a number of issues that have me worried about this Japanese situation: the terrifying state of the US finances and the sheer size of the Japanese economy, making and IMF or WB intervention nigh on impossible, the peculiar situation of Europe, that will soon start to turn to deficit spending (it has been hinted by Chancellor Merkel of Germany quite often of lately) meaning there will be more bonds on the market looking for a buyer and finally the growing reluctance on part of China, India etc to buy more foreign bonds, especially the ones from “developed” countries. These bonds pay next to nothing in interests and may be wiped away in a minute. Not only that but there’s growing concern among developed nation about keep on funding our “bad habits” while their own citizens lack good roads, electricity or even clean water.