
Japan's economy falls back into recession - kevindeasis
http://www.bbc.com/news/business-34829408
======
WildUtah
A -0.008 rate of GDP growth in a country with a -0.009 rate of working age
labor force growth is actually positive growth, albeit slow. It is not in any
realistic sense a recession.

Japan continues to be the first world nation with the best long term prospects
for its citizens. The present standard of living is not clearly exceeded
anywhere in the world.

Of course, adjustment to and recovery from severe overpopulation is going to
create some difficulties over the next half century. It's nothing the country
can't adjust to.

~~~
ekianjo
> best long term prospects for its citizens

Seems like you are conveniently ignoring the 300+ % of Japan's GDP of Public
debt. Yeah, a bright future.

~~~
Retric
Most of that is internal debt, which is very different from over sea debt.

~~~
veidr
Why? (Not disputing, just would like to have a clear explanation.)

~~~
Retric
Lot's of reasons the most obvious is it does not impact trade or currency.
However, from a repayment standpoint the debt payments are generally taxable
which reduces the effective interest rate dramatically.

Hypothetical example: Interest rates are 8%, inflation is 5% = 3% over
inflation. Now tax that 8% at 30% and your paying 5.6% - 5% inflation = 0.6%
effective rate. (Assuming you don't let interest compound tax free.)

~~~
ddeck
It most definitely affects the currency, and the currency of course affects
trade.

The core difference between internal and external debt - or more precisely
debt denominated in a country's sovereign currency vs. foreign currency - is
that a country can typically always avoid defaulting on domestic debt by
printing more money, despite typical "independence" of central banks. Rates on
domestic debt can also be controlled in a similar way.

The Japanese Central Bank is currently undertaking a quantitative easing
program of gargantuan proportions, which basically means that they create new
money every month and use it to buy Japanese government bonds. They are,
albeit indirectly, creating money and loaning it to the government, which then
uses it to run a large deficit. Government social programs are significant.
The effect on the currency has been dramatic, with the JPY depreciating nearly
40% over the last three years versus the dollar. The central is bank is
expected by many analysts to expand the program in the near future.

Although the stated intention is to generate inflation, a cynic might suggest
that without such massive buying by the central bank, the governments enormous
debt load would soon be at risk of becoming unsustainable - JGB interest rates
could easily become unserviceable as investors become more concerned.

~~~
Retric
QE is a separate and complex thing. Without going into M1 vs M2 etc. It
creates short term virtual money while bonds are out there at the cost of
destroying real money in the long term when there paid back.

If you actually want to create currency there better off buying junk bonds
that don't get paid back. That or sell the bonds for less than they paid for
them.

~~~
ZoeZoeBee
You understand the Japanese Central Bank is purchasing Securities (stocks),
not simply Bonds like The US Fed did during QE and still does as it is
currently rolling over all of the bonds and Mortgage Backed Securities which
are maturing

~~~
Retric
This has the same issue. Dividends plus any gains when they sell the stocks
remove currency from circulation.

~~~
ZoeZoeBee
Not at all considering the Japanese are using this to fund the nation's
pension system, all of that currency goes back into circulation

~~~
Retric
? That does not sound like QE as it does not add any new money into the
system.

Unless you mean they create money to buy the stuff, and then give the proceeds
to the pension system.

~~~
ZoeZoeBee
That is exactly what the Japanese Central Bank is doing, were you unaware?

[http://www.wsj.com/articles/boj-helps-tokyo-stocks-to-
soar-1...](http://www.wsj.com/articles/boj-helps-tokyo-stocks-to-
soar-1426065432)

~~~
Retric
"Analysts say the bank’s action has been a significant driver of Japan’s
stock-market rally in recent months, _combined with hefty purchases by the
$1.1 trillion Government Pension Investment Fund._ "

That sounds like there both buying stock, not that there is a handoff between
the two. Quantitative easing is specifically something Central Banks do when
they buy stuff using money created from thin air.
[https://en.wikipedia.org/wiki/Money_creation](https://en.wikipedia.org/wiki/Money_creation)

My point, is after a central bank buy something be it stocks, bonds, gold or
pogo sticks with money created on the spot they add money to the economy. But,
if they sell it for more than they bought them for then even more money is
removed from circulation.

~~~
ZoeZoeBee
Where exactly do you think the JCB is getting that money? Its a form of QE
whether you want to acknowledge it is or not. The rest of the world's
economists agree

The BoJ’s most obvious easing option is more asset purchases. Despite the
doubts of some market participants, BoJ officials do not think there is any
practical obstacle to buying faster than the current pace of Y80tn a year. It
could also expand the scope of purchases to assets such as local government
debt, buy longer-term securities, as the US Federal Reserve did under
Operation Twist, or — particularly likely given recent market falls — buy more
exchange traded funds tracking the Japanese stock market. “We expect the BoJ
will do more of the same — increasing the pace of purchases and buying more
ETFs,” says Kiichi Murashima, a Citigroup analyst."

[http://www.ft.com/intl/cms/s/0/d0867f3a-6b24-11e5-aca9-d8754...](http://www.ft.com/intl/cms/s/0/d0867f3a-6b24-11e5-aca9-d87542bf8673.html#axzz3rsZQ3UVY)

------
raverbashing
While the west complains about immigration and the issues arising from it,
here's the other side of the problem.

Japan has not grown significantly in the past 20 years and it _won 't grow_
again.
[http://www.tradingeconomics.com/japan/gdp](http://www.tradingeconomics.com/japan/gdp)

~~~
blisterpeanuts
> _Japan has not grown significantly in the past 20 years and it won 't grow
> again._

You mean, Japan won't grow again _this year_? Or ever?

Interestingly, back in the 1980s, we Americans thought Japan was going to take
over in every market: automotive manufacturing, high tech and consumer
electronics, software, even space travel eventually. They were buying up
iconic American properties like Rockefeller Center, and Japanese culture was
all the rage.

Then something strange happened in the '90s: the Internet. Suddenly the
Americans (and some Europeans) roared back into first place and left Japan
just idling by the side of the road. It was a remarkable turnaround.

By the same token, I would expect Japan eventually to bounce back from its
current doldrums. China is a huge challenge to Japanese manufacturers, but
they are still incredibly clever and innovative. Their aging population may do
a number on that innovation, though; a new baby boom is probably their best
hope.

~~~
crdoconnor
>Interestingly, back in the 1980s, we Americans thought Japan was going to
take over in every market: automotive manufacturing, high tech and consumer
electronics, software, even space travel eventually. They were buying up
iconic American properties like Rockefeller Center, and Japanese culture was
all the rage. > >Then something strange happened in the '90s: the Internet.

The Internet had nothing to do with it. Japan was simply in the midst of a
titanic property bubble which subsequently popped:

[https://en.wikipedia.org/wiki/Japanese_asset_price_bubble](https://en.wikipedia.org/wiki/Japanese_asset_price_bubble)

~~~
InclinedPlane
That's only a part of it. Between 1960 and 1985 Japan's per capita GDP
quintupled (even adjusting for inflation). That huge economic growth on the
back of a strong manufacturing and high-technology base made Japan seem like
it had unstoppable economic momentum. But, of course, it didn't. Japan's
economy is still very large and very advanced but it stopped growing and
hasn't been able to keep up with innovation in the rest of the world.

~~~
crdoconnor
>That's only a part of it. Between 1960 and 1985 Japan's per capita GDP
quintupled

Yeah, and a lot of that was phony growth caused by debt and unsustainable
asset price rises.

------
sanxiyn
Japan's trend growth is zero. This is business as usual, not bad economy. If
we want recession to mean bad economy, definition of recession for Japan needs
to be revised.

See
[http://www.themoneyillusion.com/?p=31307](http://www.themoneyillusion.com/?p=31307).

~~~
ekianjo
> This is business as usual, not bad economy

Japan needs actually steady growth if it is to tackle its public debt sooner
or later. Or then drastic measures will have to be taken at some point.

~~~
WildUtah
The public debt can be traded away with the high foreign exchange reserves or
inflated away if it becomes a problem. There's no need to worry too much about
it now as all the creditors seem eager to roll it over at low rates forever.

Drastic measures are not on the horizon.

~~~
ekianjo
Inflation of public debt is just destroying Savings and Private investment,
which is the opposite of what you want for a growing Economy.

~~~
WildUtah
I'm not recommending hyperinflation. Countries like Japan and the USA with
their current levels of debt will someday have to inflate or they will have to
renounce the debt officially. That is a mathematical certainty.

But that day is a long way off. Low inflation is better. If exchange rates are
out of balance, such as in Japan in 2010, inflation in the prices of only
imports should be sufficient and that should be moderate at worst.

In any case it's nothing to worry about now.

~~~
Roboprog
Remember the late 90s, when Fed chairman Greenspan was terrified the national
debt might actually be paid off someday (denying the rich an investment in our
future taxes)?

------
chvid
For a country like Japan which has a declining workforce and population. Maybe
it would give a clearer picture to look at GDP pr. worker or GDP pr. populus?

I am not so sure it would look so bad then.

PS: The tourism section surely is booming. :-)

~~~
adventured
It looks really bad in fact. Their place in terms of GDP per capita is a
disaster.

In 1987 they matched and then surpassed the US on GDP per capita. Within ten
years from today they'll be at half (or less) the GDP per capita level of the
US.

If Japan continues with their blatantly failed Yen destruction policies (meant
to debase their debt), they'll rapidly sink below other countries they used to
tower over on GDP per capita, such as Spain or New Zealand.

Preliminary 2015 figures peg their GDP per capita at 24th, at $32k. The US is
nearly $56k by comparison.

~~~
WildUtah
This is a classic example of the problems with using real GDP as a measure of
anything. The US GDP counts crime and corruption as positive contributors to
the economy; the error is so deeply embedded in the idea of GDP that
economists have a name for it: the Broken Window Fallacy. Japan's GDP counts
the world's most efficient urban infrastructure, best rail system, and world's
best urban zoning, transit, and development practices against it because it
makes unsubsidized city living relatively cheap. Inflation calculations in
both countries are nothing but political propaganda.

If you measure cost of living against typical wages, Japan outperforms the USA
and far surpasses the UK and almost all of Europe. Just compute a budget
including owning a home in a good school district in a safe neighborhood.
Don't forget health care and owning two or three cars in the USA. Add back in
the value of all the untaxed employer provided benefits in Japan.

~~~
laotzu
>Gross National Product counts air pollution and cigarette advertising, and
ambulances to clear our highways of carnage. It counts special locks for our
doors and the jails for the people who break them. It counts the destruction
of the redwood and the loss of our natural wonder in chaotic sprawl. It counts
napalm and counts nuclear warheads and armored cars for the police to fight
the riots in our cities. It counts Whitman's rifle and Speck's knife, and the
television programs which glorify violence in order to sell toys to our
children. Yet the gross national product does not allow for the health of our
children, the quality of their education or the joy of their play. It does not
include the beauty of our poetry or the strength of our marriages, the
intelligence of our public debate or the integrity of our public officials. It
measures neither our wit nor our courage, neither our wisdom nor our learning,
neither our compassion nor our devotion to our country, it measures everything
in short, except that which makes life worthwhile. And it can tell us
everything about America except why we are proud that we are Americans.

-Robert Kennedy, Speech at the University of Kansas at Lawrence (18 March 1968)

------
michaelpinto
Something to keep in mind is that Japan is very impacted by the economy of
China: Not just direct exports and tourism, but as the rest of Asia suffers
from the slow down in China that also impacts Japanese exports as well. And on
the tech side many Japanese brands from Sharp to Sony haven't been doing too
well.

------
nness
Excuse the over-simplification, but is the Japanese government's reluctance to
proactively stimulate their economy built partially on a desire to secure the
pension for a few more years (both as a product of cultural expectations and
the appeasing mostly elderly voter-base)?

~~~
programmernews3
It is likely a major piece of the puzzle and will also be due to reverence of
their elderly.

~~~
nness
Ah yes, that's what I meant by "cultural expectations," but "reverence" is
certainly a far more succinct way to describe it.

------
z92
Plus global trade is down. I am afraid the future is looking a bit darker than
usual.

------
Shivetya
Taxing themselves out of growth. Effectively their tax rates are too high on
individuals and business that there is no incentive to spend or grow. Similar
reason why any supposed US recovery has been anemic.

~~~
Karunamon
We've got the fourth _lowest_ tax rate among OECD convention countries (if
we're looking at taxes vs GDP). Look at it from a perspective of rates on
$100k gross income, and we're still not even in the top 50%.

I don't think any US economic issues can be laid at the feet of our tax rates
with that in mind.

Interestingly enough, Japan is usually only 3 positions above us in Tax/GDP,
and 9 positions above us in Tax/$100K, which calls the thesis of this article
into question...

~~~
blisterpeanuts
US corporate tax rates are the highest among developed countries, however.
Capital gains are also taxed higher in the U.S. than most other OECD
countries.

Perhaps it all balances out between lower personal and higher corporate; I
don't know. But there are so many other factors involved--debt, military
activity, outsourcing trends, health and fitness, weather--that one can't
realistically call out taxation as a major cause of macroeconomic trends.

------
acd
But Japans central bank has printed more money and longer than most countries
and it still does not work in making its economy grow.

Western countries has copied Japans money printing expecting it to work better
for us than in Japan. "Insanity: doing the same thing over and over again and
expecting different results." \- Albert Einstein

We will need to engineer a new economic system that can deal with climate
change which requires less physical goods. Valuing things more like renewable
energy, repair ability, upgrade ability.

~~~
simonh
The policy responses in the west have been very different from in Japan. For a
start Europe only started doing anything like QE this year, and only in a very
limited fashion compared to the US or Britain.

If you look at the US and Britain, they did carry out extensive money printing
operations in the form of QE, but they also let their economy take the hit
hard and early in the form of bankruptcies, job losses and housing
devaluation. As a result, their economies have largely been through the pain.
The US economy particularly has bounced back and it actually doing pretty well
in global terms with growth of 3.7%. That's hardly 'the same results' as in
Japan.

So Europe followed a completely different path and is still stuck with low
growth, while America and Britain did use QE but avoided falling back into
recession. It's not as if everything's come up roses in the West, we still
have major challenges to deal with, but how things have panned out is
completely different.

