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So much for the IMF

‎”(There is) a growing recognition that the dispersion of credit risks to a broader and more diverse group of investors…has helped make the banking and wider financial system more resilient. The improved resilience may be seen in fewer bank failures and more consistent credit provision.”
From the IMF’s (shortsighted) Global Financial Stability Review, April 2006

What rough beast slouches next to Washington to be bailed out?

Jesper Koll at TEDxTokyo

Jesper Koll, Managing Director of Research at JP Morgan, spoke at the TEDxTokyo event this past weekend. The presentation focused on the difference between the collapse of the Japanese bubble and the current economic crisis.

BOJ dollar swap?

According to Breitbart:

The Bank of Japan’s decision Monday for a dollar swap accord with the U.S. Federal Reserve was welcomed by analysts, who said pumping liquidity into the banking system and helping businesses raise necessary funds are crucial to keeping Japan’s economic recovery on track.

Welcomed by analysts, in other words, it won’t work. The article goes on:

The BOJ decided on its commitment for the Fed’s program to provide dollar money to major central banks under bilateral swap accords. The recipient banks would in turn inject the liquidity into domestic money markets, where demand for dollars sharply rises as investors dump euros due to fears the sovereign debt crisis in Greece could escalate.

Interesting that the word “sovereign” comes up in this paragraph.

It gets worse:

“Everybody might have thought they were seeing another Lehman shock,” said Masamichi Adachi, senior economist at JPMorgan Securities Japan Co.

Greece is the new Lehmans? Really? Anyone who actually thought they were seeing another “Lehman Shock” needs to take Risk Management 101 again.

The Greek problem and its impact on global financial markets is “feared to cause jumps in short-term interest rates and in the cost for companies to raise operating money,” said Hideo Kumano, chief economist at the Dai-ichi Life Research Institute.

The contrarian position is thus made obvious; Greece doesn’t matter. Seriously, how much could short-term interest rates jump in Japan? Pin down an exact number or…I guess the alternative is give a vague quote to a journalist.

[Kumano] said rises in the cost of accumulating necessary funds would deteriorate corporate sentiment and further undermine appetites for business investment, adding that such fallouts could critically hit the Japanese economy, which has been showing signs of recovery.

This literally makes no sense. No signs of recovery are cited, except for this:

The BOJ has presented an optimistic view of Japan’s economic outlook…So as to keep the vulnerable recovery on track, the BOJ is trying to take preemptive measures.

Oh, the BOJ is optimistic. A bunch of rich guys with private chauffeurs are optimistic. That must feel good.

In its biannual report released last month, the central bank estimated Japan’s economy will grow 1.8 percent in the current fiscal year through March.

The BOJ has downgraded its estimates for GDP growth year after year. They consistently are one of the worst predictors on record of how the Japanese economy will perform.

The kicker:

[The BOJ] suggested deflation will end in the next fiscal year, projecting a 0.1 percent increase in a key consumer price index in fiscal 2011.

Wow, that’s awesome. 0.1% - how ambitious. Good luck with that. Bear in mind that Japan includes fuel prices in core CPI.

As the Greek crisis hit financial markets and was feared to unsettle the global economy, “Japan must closely watch how the crisis could hit demand around the world and subsequently push back Japanese exports,” JPMorgan’s Adachi also said.

Has Joseph Nye fallen silent?

The DPJ really doesn’t get it or: How I learned to stop worrying and love the market

A slew of contradictory economic data is pouring out of Japan this week: McDonald’s saw net profit fall 80% in the first quarter while Uniqlo sales fell 12.4% in April. However, the Japan Center for Economic Research says that GDP increased 1.4% in March against February, for the second straight monthly rise. Miki Shoji reports that in April, Tokyo office vacancies hit an all-time high for the third consecutive month, at 8.82% - the highest reading seen since the firm starting tracking vacancy rates in 1989. Read more

Keidanren to call for 10% sales tax in Japan?

The Nikkei is reporting that Keidanren (The Japan Business Federation) is set to call for an increase in Japan’s sales tax from the current 5% to 10%, with increases coming as soon as FY2011.

The Nikkei also tells us that Keidanren is seeking a decrease in corporate taxes: Read more

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

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