Japan Archives - Page 2 of 3 - the patient investor

May 21, 2013

Carney Warns Europe Faces Decade of Stagnation Without Key Reforms | WSJ

Nirmala Menon at WSJ quotes Mark Carney, incoming governor of the Bank of England:

Mr. Carney, currently Canada’s top central banker, said Europe can draw lessons from Japan on the dangers of taking half measures……..“Deep challenges persist in its financial system. Without sustained and significant reforms, a decade of stagnation threatens,” Mr. Carney said in his final public address as governor of the Bank of Canada.

May 6, 2013

Beware China’s civilian-military relationship | The Japan Times

Masahiro Matsumura, professor of international politics at St. Andrew’s University (Momoyama Gakuin Daigaku) in Osaka, writes

…….the Chinese state apparatus is largely detached from the military, while the party’s top civilian leaders have only a loose grip on the generals.

Worse still, the current fifth generation of civilian leaders is made up of veritable dwarfs in military affairs. By contrast, the PLA’s leaders have become increasingly professionalized, but without the tempering influence of effective civilian control, which might well collapse entirely if China’s leaders continue to accept unauthorized military actions, particularly in the East or South China Sea, as faits accomplis. Line commanders could take advantage of the equivocality of civilian policy, particularly given the military’s growing political clout and the CCP’s dependence on popular nationalist sentiment.

March 28, 2013

Will the Chinese Be Supreme? | Ian Johnson | The New York Review of Books

Ian Johnson highlights how China’s strategic blunders have painted it into a corner:

Just as [Pre WW I] Wilhelminian Germany should surely have seen that building a blue-water navy would cause Britain to form alliances against it, so too should China understand that demanding control over islands far from its shores but close to its neighbors’ would cause a backlash. (Here one thinks not so much of the Senkaku/Diaoyus but of the shoals, reefs, and islets in the South China Sea.) Even the battle for the Senkaku/Diaoyus seems to have no satisfactory endgame for China except a permanent state of tension with its most important neighbor.

……..today the country’s tactics have left it surrounded by suspicious and increasingly hostile countries; indeed, it’s probably no exaggeration to say that China has no real allies.

February 13, 2013

Time for U.S. to Disengage from North Korea Crisis | Cato Institute

Doug Bandow suggests:

Washington should begin contemplating, within earshot of Beijing, getting out of the way of its allies if the North continues to develop nuclear weapons. The message to China should be: if your client state continues its present course, you may face a nuclear-armed Japan. If that happens, blame your buddies in Pyongyang.

February 5, 2013

Nana Rolland: North Korean Pawn in a Chinese Chess Game – WSJ.com

NANA ROLLAND at WSJ writes:

While it steps up its own provocative actions, including recurrent intrusions into Japanese waters and airspace around the disputed islands, China exhorts the U.S. to restrain its “troublemaking” Japanese friends. The implied linkage is clear: As Beijing tries to forestall North Korean brinksmanship, it expects Washington to do the same.

We have seen this gambit before. In 2003, when Beijing feared that Taiwanese president Chen Shui-bian might be inching toward independence, it called on Washington to bring him to heel. In return, it agreed to host multiparty negotiations to persuade Pyongyang to abandon its nuclear-weapons programs.

Beijing got the better end of that deal…..

December 9, 2012

China is now heading toward Japan-style economic paralysis if it doesnt change course | Quartz

Jack Rodman, president of Global Distressed Solutions LLC, spent 1999 to 2011 living in Japan and China, packaging and disposing of nonperforming loans and distressed assets. He writes on the problems facing China:

At the end of 1989, Japan’s bubble economy burst and its economic miracle came to an abrupt end. The Nikkei exchange fell from nearly 40,000 to its current 10,000 range. Over the course of 20 years, what appeared to be “unstoppable” economic growth proved to be anything but.

Today, China, in some ways, appears to be closer to following Japan than to sustaining its own economic miracle. China’s Shanghai Index (stocks) has fallen from a high of 7,000 in 2007 to a low of 2,000 for the past few years, and Chinese domestic investors have little confidence in their domestic stock market. The Japanese bubble, and its aftermath, was the result of a series of domestic financial and economic imbalances, many of which China faces today—to varying if not greater degrees….

November 12, 2012

Japan economy shrinks as China dispute takes toll

Elaine Kurtenbach at USA Today writes:

Japan’s economy contracted in the latest quarter, signaling that like Europe it may already be in recession, further weighing down world growth. On an annualized basis, the world’s No. 3 economy shrank 3.5% in the July-September quarter, the government reported Monday. It was in line with gloomy forecasts after Japan’s territorial dispute with China hammered exports that were already weakened by feeble global demand……

Rajeshni Naidu-Ghelani at CNBC writes that Japan’s recovery depends on global demand:

Izumi Devalier, Japan economist at HSBC in Hong Kong backed that sentiment saying Japan’s economic development over the past decade shows that it’s been extremely dependent on exports and external demand.

“Sad to say, Japan will have to wait for the overseas economies to pick up before it sees its own economy really lifted,” Devalier told CNBC.

September 22, 2012

As the U.S. Borrows, Who Lends? – NYTimes.com

By Floyd Norris

Estimates by the Treasury Department released this week indicated that over the 12 months through July, China reduced its position in Treasury securities by $165 billion, cutting them to $1.15 trillion despite making a small amount of purchases in July. And the Federal Reserve reported that, as of Wednesday, it owned $1.65 trillion in Treasury securities, $17 billion less than it had owned a year earlier.

…..China’s selling of Treasuries over the 12-month period was offset by the actions of Japan, another country whose trade surplus with the United States remains large. The Japanese are estimated to have increased their holdings by $232 billion over the 12 months, to $1.12 trillion. Those figures include both government and private holders of Treasuries.

via As the U.S. Borrows, Who Lends? – NYTimes.com.

August 21, 2012

Milton Friedman's Advice

In 1997 Milton Friedman commented on Bank of Japan policy following Japan’s deflationary spiral of the early 1990s:

Defenders of the Bank of Japan will say, “How? The bank has already cut its discount rate to 0.5 percent. What more can it do to increase the quantity of money?”

The answer is straightforward: The Bank of Japan can buy government bonds on the open market, paying for them with either currency or deposits at the Bank of Japan, what economists call high-powered money. Most of the proceeds will end up in commercial banks, adding to their reserves and enabling them to expand their liabilities by loans and open market purchases. But whether they do so or not, the money supply will increase.

There is no limit to the extent to which the Bank of Japan can increase the money supply if it wishes to do so. Higher monetary growth will have the same effect as always. After a year or so, the economy will expand more rapidly; output will grow, and after another delay, inflation will increase moderately. A return to the conditions of the late 1980s would rejuvenate Japan and help shore up the rest of Asia.

Austerity measures adopted in Europe are failing and central banks are likely to attempt Friedman’s option in a number of guises. Already, as Gary Shilling points out “competitive quantitative easing by central banks is now the order of the day.” The Bank of Japan last year expanded its balance sheet by 11 percent, the Federal Reserve by 19 percent, the European Central Bank by 36 percent and the Swiss National Bank by 33 percent. Even countries with relatively strong balance sheets, like Switzerland, are forced to respond to prevent appreciation of their currencies from harming exports.

Inflation will remain moderate only so long as central bank balance sheet expansion is offset by deflationary pressures from private sector deleveraging. That is the difficult task ahead: to maneuver a soft landing by balancing the two opposing forces. Failure to do so could lead to a bumpy ride.

February 23, 2012

Yen’s Fall May Benefit Japan Firms – WSJ.com

TOKYO—As the yen finally buckles versus the dollar, Japan’s exporting manufacturers are sitting on potential operating-profit gains that could be worth billions of dollars on paper, likely triggering some higher earnings forecasts if current trends persist.

….Like many of Japan’s biggest companies, the big three auto makers—Toyota Motor Co., Honda Motor Co. and Nissan Motor Co.—are heavily exposed to exchange-rate fluctuations. Estimates by the three show that every ¥1 variation in the dollar exchange rate has an impact of ¥67 billion on their combined operating profit. That means the dollar’s gains since the central bank’s easing could notionally assist the three auto makers’ annual operating profit to the tune of ¥165 billion, or more than $2 billion at recent exchange rates.

via Yen’s Fall May Benefit Japan Firms – WSJ.com.