Japan - Dancing on the Edge of Calamity

[nitroglycol]

The reality of Japan’s fiscal situation is as close to calamitous as any major economy has ever experienced, in peace time or during war. And it is set to become still more problematic. The on-balance sheet central government gross debt is set to touch 200% of GNP within a matter of a few quarters. With the economy contracting and deflating, economic policy, indeed large parts of the country’s current economic structure are hurtling ever deeper into a complete cul de sac.
We do not have a good picture of the off-balance sheet obligations of the Japanese state, but it is significant. Earlier this decade, estimates based on data released by the Ministry of Finance seemed to indicate that off balance sheet claims on the state were then well in excess of 300% of GNP. In the meantime, the on-balance sheet debt continued to soar.

Plenty more here. Interesting stuff.

[c1ue]

Re: Japan - Dancing on the Edge of Calamity

A nice monetarist's view of Japan - but the 'knowledgeable person' doesn't acknowledge key points:

1) Japan's debt is internal. While this doesn't detract from the size, it does mean that Japan's ability to control interest rates is far greater than it appears

2) The export situation is true. But again, what is the solution? Merely being lower cost is not going to work; Japan has been squeezed out of the low end, is getting attacked in the middle, and preparations are underway for assaults at the high end

3) The security situation is linked to the economic situation. The Faustian bargain Japan had with the US appears broken; whatever new policy replaces the existing economic/security arrangement will also play a major role in what Japan does in the next 2 decades

So far the new regime does not appear to have a clear idea on what goals are to be set, much less a policy on what will be done.

[touchring]

Re: Japan - Dancing on the Edge of Calamity

Japan's economic problems are often overstated. The problems other Asian countries are facing are much more severe than Japan's.

The cost of living in Singapore is almost similar to 2nd tier cities in Japan, but the wages on blue collar jobs is one third of Japan's and middle income earners, earn about half of their counterparts in Japan.

The situation is no better in other major Asian cities like Hong Kong, Shanghai and Seoul. Costs rising quicker than wages.

A nice monetarist's view of Japan - but the 'knowledgeable person' doesn't acknowledge key points:

1) Japan's debt is internal. While this doesn't detract from the size, it does mean that Japan's ability to control interest rates is far greater than it appears

2) The export situation is true. But again, what is the solution? Merely being lower cost is not going to work; Japan has been squeezed out of the low end, is getting attacked in the middle, and preparations are underway for assaults at the high end

3) The security situation is linked to the economic situation. The Faustian bargain Japan had with the US appears broken; whatever new policy replaces the existing economic/security arrangement will also play a major role in what Japan does in the next 2 decades

So far the new regime does not appear to have a clear idea on what goals are to be set, much less a policy on what will be done.

[blazespinnaker]

Re: Japan - Dancing on the Edge of Calamity

Comparing japan to the rest of the world is silly. Japanese people are simply different.

One for all, is there motto, and I suspect if someone came out and politely asked everyone to forgive 50% of their savings in order to wipe out government debt - they probably would.

[*T*]

Re: Japan - Dancing on the Edge of Calamity

1) Japan's debt is internal. While this doesn't detract from the size, it does mean that Japan's ability to control interest rates is far greater than it appears

Reinhart & Rogoff showed that internal debt also matters and still provides an incentive for collapse.

[c1ue]

Re: Japan - Dancing on the Edge of Calamity

Reinhart & Rogoff showed that internal debt also matters and still provides an incentive for collapse.

True, but R & R did not also look at internal savings.

Unlike almost all of the R & R examples - Japan has huge internal private savings to match the internal public debt.

While I haven't looked at all of the R & R examples, almost all the more recent ones (Russia, Argentina, etc etc) did not have this situation.

[Spartacus]

Re: Japan - Dancing on the Edge of Calamity

don't know why it reminded me of this ...