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Japan Economy Watch sums up the dreadful state of Japan’s macro data, debt levels and political paralysis

Although Japan’s macro indicators are tracked here, it sometimes helps to see everything put together. Over at Japan Economy Watch, Edward Hugh has done just that, and the data shown collectively in his post is simply breathtaking. Revised GDP data, industrial output, machinery orders, consumer confidence, the Economy Watchers Index, wages, household spending and the Tankan are all covered in one post, with the yen’s rise and a look at Prime Minister Aso Taro’s continuing fall in approval rating also included in this must-read post.

Mr Hugh weighs in with some very accurate comments on Japan’s national debt:

…[W]e have reputedly just been through Japan’s longest running expansion in I don’t know how many years, but if you look at the chart you will find that net debt didn’t cease to rise at any single point, while of course, as life expectancy went up even more than anticipated, the implicit liabilities in the social security system also rose. Well basically, I claim this is unsustainable, since to show evidence of sustainability you need to be able to establish that Japan can (with a median population age of 43 and rising) still have expansions which generate enough sustained growth (after you turn the juice of zero interest rates and substantial fiscal injections off) to be able to bring the trend percentage of net debt (that is the one between the trough of one cycle and the trough of the next) down. We are a long long way from this at this point, and as such any claim that Japan will be able to bring the net debt dynamic under control should be treated as purely hypothetical and speculative. What we need is evidence, but Aso’s recent policy initiatives suggest that things are now, rather, about to move in the opposite direction.

The red lights on the console are madly blinking, and the alarm is piercing. As each day passes, it seems more and more clear that the LDP, on whom much of this mess can be pinned, will need to pass on in order for any real progress to be made. Of course, as the LDP loses its grip on power, the risk that the bureaucracy will strengthen looms larger.

For a closer look at the disaster of the Aso premiership, see the recent article “2008: Change and Politics” by Tobias Harris at Neojaponisme.

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