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Massive Fiscal Stimulus Spending Project Proposal #2: Changing Lanes

Back in May, I laid out a plan by which the Japanese government could waste tremendous amounts of public money by simply issuing brand new bank notes of radically different sizes and shapes, while outlawing the use of current bank notes.

While the previous plan could potentially pump billions of yen into the economy, the next plan should cost much more. To do this, Japan simply has to switch driving from the left to the right side of the road. Of course, other countries have pulled this off without spending huge sums of money, such as Sweden, but Japan can avoid falling into this trap by ensuring that the process be as expensive and wasteful as possible. Here’s how it works: Read more

Things heating up over yen appreciation

When Peter Schiff recently said that Japanese policymakers were embracing a “strong yen” policy, one of my eyebrows raised a bit. Although Finance Minister Hirohisa Fujii has made it clear that he does not support currency intervention, I don’t remember hearing anything about a “strong yen” policy. As the Nikkei puts it:

During his bilateral talks with U.S. Treasury Secretary Timothy Geithner in Pittsburgh last week, Fujii said Japan would ”in principle” not intervene in the currency market.

”There is a sense of security in yen buying,” said Koji Fukaya, senior currency strategist at Deutsche Securities Inc. ”His remarks were perceived (by the market) as (Japan) accepting a strong yen,” he said.

Now Bloomberg is reporting Fujii’s contention that his statements were misconstrued: Read more

Peter Schiff on the rising yen and the dollar carry trade

But are Japanese policymakers really embracing a “strong yen” policy? Or has the media twisted up some quotes?

Japan’s public pension fund lost a record 10.17 trillion yen in fiscal 2008

In fiscal 2006 and 2007, Japan’s public pension system managed to log losses. In FY2007, the fund earned money on government bonds, but lost a whopping 7.5 trillion in in equities positions. The total FY2007 loss, 5.65 trillion yen, was the largest on record. Until fiscal 2008.

Yesterday it was announced that the public pension fund lost 10.17 trillion yen in FY2008. This was the third straight year in which the fund has lost money. According to the a report from the Ministry of Health, Labour and Welfare, The fund experienced a 0.9% increase in revenue due to premium rises, while pension payouts increased by 2.7%.

Thus, the fund itself saw a rise in payouts that outstripped the increase in premiums, while losing 10.17 trillion yen at the same time.

Are the manifestos of either political party valid at this point?

Fundraising galore, corporate bond issuances at record high in June, and government enforced inefficiency at Japan Air Lines

Corporate bond issuances by Japanese firms shot to a record 1.74 trillion yen in June, according to a report in today’s Nikkei. This figure is up 150% on May 2008, reflecting the intense amount of fundraising that is currently happening in Japan.

June’s bond issuances appear to be interesting because many are coming from non-financial institutions. Sony issued 220 billion yen in debt, while Honda’s June issuance, its first in 16 years, stood at 70 billion yen. Read more

OECD: Japan’s public pension to provide 34% of salary

According to the OECD’s “Pension at a Glance 2009″ report , Japan’s public pension system is expected to provide 33.9% of salary as pension to workers entering the workforce in 2009. This is the second lowest figure in the OECD, with only Britain trailing Japan. The OECD average for public pension payouts is 59% of salary.

The report also highlights that 22% of Japanese people over 65 had incomes below the what the OECD considers to be its poverty threshold (defined as half of median household income). The OECD average for people aged over 65 living under the poverty line is 13.3%. Read more

Japan not banning cash any time soon

The foreign media recently seems to have pounced on a story concerning plans to ban the use of cash and push nominal interest rates down to -0.4% in an attempt to fight deflation in Japan.

It won’t happen.

While electronic cash payments will continue to grow as a proportion of transaction settlement methods, the idea of banning cash altogether is impractical. At the same time, the idea of creating negative nominal interest rates is political suicide. In such a situation, the yen itself would be essetially worthless.

To be honest, I had a lot more ideas on this topic, but the proposal seems so absurd that it’s better treated as a media oddity.

The Onion: US To Trade Gold Reserves For Cash Through Cash4Gold.com

This piece from The Onion is satire - at least for now - but it’s well done as usual. It’s subtle that the writers valued US gold holdings at $200 billion.

US To Trade Gold Reserves For Cash Through Cash4Gold.com

Glenn Beck on the counterfeit bonds

Glenn Beck is passionate, the only US commentator willing to discuss the subject, but doesn’t really get the issue. His guest, however, is dead on at times, while sounding like someone who doesn’t have a basic understanding of how the Treasury works at others in the video that follows. The fact is that over two weeks since the two men carrying these bonds were arrested, the truth about what they were doing has not yet been made public:

My favorite quote: “Is a dollar really worth 100 cents, or is it worth less than that?”

Dude, I think they explained that in third grade, at least at Cathoilc Schoool. Aquinas can explain it pretty easily in terms of math.

Bonds held by Japanese in Italy nearly equal to the amount of leftover TARP funds

Very little news has been reported since the initial discovery of two men with Japanese passports who were apparently trying to smuggle $134 billion worth of US Treasuries from Italy into Switzerland. The initial Kyodo report stated that on June 3rd:

[T]wo unidentified Japanese in their 50s concealed the bonds, including 249 U.S. Treasury bonds worth $500 million each, in a suitcase with a false bottom.

249 times $500 million is $124.5 billion. It has also been rumored that the men were carrying other bonds denominated at $1 billion. At any rate, the total amount reported, $134 billion ($134.5 billion in later reports), appears to be consistent. Read more

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