Many international experts like Citigroup, Inc. of U.S.A. are increasingly skeptical and wary of the huge, populist and seemingly unsustainable, unwise stimulus program of Prime Minister Shinzo Abe for the ailing Japan economy. What is worrisome is that even Japanese experts like Takeshi Fujimaki, a former adviser to billionaire investor George Soros, predicts possible Japanese economic collapse as a result of this stimulus plan by Abe. Read the two news reports below on these dire forecasts. Let us hope for the best always, but be wary of, keenly aware of and prepare for the worst too!
Japan is still the world's third biggest economy, and its possible collapse or even nonstop stagnation has negative implications for all of us.
I believe there are other bitter pills and real reforms needed to revive the stagnating Japanese economy.
(This graphic image of Japan's economic meltdown, for the past three decades, sourced from fedupusa.org)
(This image below sourced from npr.org)
Here's a worrisome but realistic possible Japan scenario which we should all prepare for:
Here is a report by journalist Mayumi Otsuma for Bloomberg news:
Japan is still the world's third biggest economy, and its possible collapse or even nonstop stagnation has negative implications for all of us.
I believe there are other bitter pills and real reforms needed to revive the stagnating Japanese economy.
(This graphic image of Japan's economic meltdown, for the past three decades, sourced from fedupusa.org)
(This image below sourced from npr.org)
Here's a worrisome but realistic possible Japan scenario which we should all prepare for:
Abe’s Stimulus May Trigger Japan Default, Fujimaki Says
By Monami Yui & Yumi Ikeda - Jan 15, 2013 4:27 PM GMT+0800
Prime Minister Shinzo Abe’s fiscal and monetary stimulus measures may trigger a collapse of Japan’s economy as early as this year, according to Takeshi Fujimaki, a former adviser to billionaire investor George Soros.
The yen has slumped 6 percent since elections last month returned power to the Liberal Democratic Party run by Abe, who’s demanded that the Bank of Japan (8301) undertake unlimited cash infusions to end deflation. The premier also unveiled 10.3 trillion yen ($116 billion) in extra spending last week, a step that will add to public debt that’s already more than double the size of the nation’s economy.
“Large-scale spending is ridiculous given the amount of debt Japan has accumulated, while I think highly of Abe in regards to his intention to weaken the yen to support growth,” the president of Fujimaki Japan, an investment advising company in Tokyo, said in an interview on Jan. 11. “Abe’s policies would have worked some 10 years ago, but now they will only accelerate an economic collapse.”
Fujimaki said in an interview last June that Japan may default on its debt within five years and the yen could weaken to as much as 400-500 per dollar. He advised Japanese investors then to hold assets in foreign currencies such as the greenback, Swiss franc, U.K. pound and the Australian and Canadian dollars.
Borrowing in yen and investing in those currencies would have returned an annualized 32 percent as of yesterday, Bloomberg data show.
The yen’s drop and the government’s spending plan have helped drive the Nikkei 225 Stock Average of domestic shares up 12 percent since the election. A weaker yen makes Japanese-made products more competitive overseas and boosts the value of repatriated earnings.
Fujimaki joined the Tokyo office of Morgan Guarantee Trust Co., which merged into JPMorgan Chase & Co., in 1985 and later served as managing director and treasurer. He was hired by Soros Fund Management, once the world’s biggest hedge fund group, in 2000 and stayed less than a year, saying to Bloomberg News at the time that he failed to read the Japanese bond market correctly.
Japan will issue an additional 8 trillion yen in bonds to finance the supplementary budget for the fiscal year ending March 31. The nation’s outstanding debt will swell to 245 percent of gross domestic product in 2013, the most in the world and twice the debt-to-GDP ratio for the U.S., according to estimates by the International Monetary Fund.
“The government won’t be able to get enough funding if the Japanese withdraw their bank deposits to buy foreign-currency assets in fear of further yen weakness,” said Fujimaki. “Japan’s fiscal collapse could happen even tomorrow.”
So far, the market for Japanese government bonds hasn’t signaled any concern about an impending collapse. Benchmark 10- year securities sank four basis points to 0.77 percent today, the least this year and the third-lowest level globally. Persistent deflation has supported domestic demand for JGBs, which are 91 percent owned in country.
“I prefer to see a crash of Japan’s debt sooner than later because there’s no other way to revive Japan’s economy,” said Fujimaki. “The biggest merit for that is we won’t have to repay debt that we can never repay. Otherwise, young people will have to work like coach horses just to pay tax.”
The yen has slumped 6 percent since elections last month returned power to the Liberal Democratic Party run by Abe, who’s demanded that the Bank of Japan (8301) undertake unlimited cash infusions to end deflation. The premier also unveiled 10.3 trillion yen ($116 billion) in extra spending last week, a step that will add to public debt that’s already more than double the size of the nation’s economy.
Fujimaki said in an interview last June that Japan may default on its debt within five years and the yen could weaken to as much as 400-500 per dollar. He advised Japanese investors then to hold assets in foreign currencies such as the greenback, Swiss franc, U.K. pound and the Australian and Canadian dollars.
Borrowing in yen and investing in those currencies would have returned an annualized 32 percent as of yesterday, Bloomberg data show.
Nikkei Surge
The BOJ, scheduled to hold a policy meeting on Jan. 21-22, is poised to adopt the 2 percent inflation target advocated by Abe, doubling its existing goal of 1 percent, according to people familiar with BOJ officials’ discussions. Central bank Governor Masaaki Shirakawa said today the economy remains weak and the BOJ will pursue “powerful monetary easing.”The yen’s drop and the government’s spending plan have helped drive the Nikkei 225 Stock Average of domestic shares up 12 percent since the election. A weaker yen makes Japanese-made products more competitive overseas and boosts the value of repatriated earnings.
Fujimaki joined the Tokyo office of Morgan Guarantee Trust Co., which merged into JPMorgan Chase & Co., in 1985 and later served as managing director and treasurer. He was hired by Soros Fund Management, once the world’s biggest hedge fund group, in 2000 and stayed less than a year, saying to Bloomberg News at the time that he failed to read the Japanese bond market correctly.
Yen Weakness
He has since lectured at Waseda University and Hitotsubashi University in Tokyo, and written more than 20 books, including a title due for release this month that translates to “A Vulnerable Japan: Objections to Baseless Optimism.”Japan will issue an additional 8 trillion yen in bonds to finance the supplementary budget for the fiscal year ending March 31. The nation’s outstanding debt will swell to 245 percent of gross domestic product in 2013, the most in the world and twice the debt-to-GDP ratio for the U.S., according to estimates by the International Monetary Fund.
“The government won’t be able to get enough funding if the Japanese withdraw their bank deposits to buy foreign-currency assets in fear of further yen weakness,” said Fujimaki. “Japan’s fiscal collapse could happen even tomorrow.”
So far, the market for Japanese government bonds hasn’t signaled any concern about an impending collapse. Benchmark 10- year securities sank four basis points to 0.77 percent today, the least this year and the third-lowest level globally. Persistent deflation has supported domestic demand for JGBs, which are 91 percent owned in country.
Young People
The yen may weaken beyond 400 per dollar should the BOJ print money to absorb the nation’s debt, according to Fujimaki, describing a process known as monetization. The yen reached 89.67 per dollar yesterday, the weakest since June 2010, before rallying to 88.81 as of 5:20 p.m. in Tokyo today.“I prefer to see a crash of Japan’s debt sooner than later because there’s no other way to revive Japan’s economy,” said Fujimaki. “The biggest merit for that is we won’t have to repay debt that we can never repay. Otherwise, young people will have to work like coach horses just to pay tax.”
***
Here is a report by journalist Mayumi Otsuma for Bloomberg news:
Abe Stimulus Risks Fizzling as Citigroup Sees Japan Job Gap
By Mayumi Otsuma - Jan 17, 2013 1:53 PM GMT+0800
Japan’s 10.3 trillion yen ($117 billion) fiscal stimulus may add less than a quarter of the jobs the government predicts, casting doubt on Prime Minister Shinzo Abe engineering a sustained recovery.
Even with more central bank easing, most of the impact of Abe’s spending won’t spread far beyond public works projects, Citigroup Inc. (C) says. It estimates that 100,000 jobs will be created, compared with the government’s figure of 600,000. BNP Paribas SA (BNP) says 150,000.
Enlarge image 
Abe is returning to a strategy that failed to end Japan’s stagnation over the last two decades even as the nation’s debt burden nearly tripled and extra stimulus spending totaled 80 trillion yen, according to BNP Paribas. Another failure may deepen voter apathy in a political system that has produced seven prime ministers in six years, while adding to the risk of a surge in bond yields.
“Fiscal stimulus is like morphine, because if you want to maintain the same level of effect you have to keep upping the dose,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “Japan has failed to achieve a sustainable economic expansion, and the country’s record proves the strategy is wrong.”
The yen remained higher after a two-day rally as investors weigh the likelihood of more easing by the Bank of Japan (8301) next week. The currency was at 88.39 per dollar as of 2:49 p.m, up 1.4 percent from this week’s low on Jan. 14. The Nikkei 225 Stock Average (NKY) fell 0.4 percent after sliding yesterday by the most in eight months.
JPMorgan Chase & Co. said today it sees Asian Development Bank President Haruhiko Kuroda as the main candidate to replace BOJ Governor Masaaki Shirakawa in April. Opposition leader Yoshimi Watanabe said in an interview yesterday that the next BOJ chief shouldn’t be a former central bank bureaucrat.
The Japanese government poured 33.8 trillion yen into stimulus measures in the 1990s, with 45 trillion yen added in the 2000s, according to estimates from BNP Paribas based on Finance Ministry data.
The average economic growth rate decelerated from 4.6 percent in the 1980s to 1.1 percent in the 1990s and 0.8 percent in the following decade, according to the brokerage.
More than a third of the spending package announced last week will go to disaster prevention and reconstruction after the March 2011 earthquake and tsunami. Extra spending will boost gross domestic product by about 2 percentage points, the government said.
Low unemployment may be masking challenges as older workers exit the labor force and wages stagnate in a nation struggling to emerge from a third recession in five years.
Panasonic Corp. (6752) eliminated more than 38,800 jobs in the year ended September and said last week it may close some businesses. Renesas Electronics Corp. said today it will cut more than 3,000 jobs.
‘‘At stake is whether wages will rise,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management. “Abe will probably keep stimulating the economy through yen depreciation and fiscal spending, but that won’t induce a rebound in fundamentals that are crucial for jobs.”
“So far, Abe has presented no concrete remedies to reverse the southbound trend of Japan’s job-market,” Okubo said. “We can’t help but be skeptical about the employment outlook.”
Citigroup predicts that economic growth will rise to 2.2 percent in the fiscal year from April before falling to 0.3 percent the year after. Nomura Securities Co. says growth will be 1.8 percent in the year from April and at 0.3 percent in the following 12 months.
Japan’s government debt probably climbed to 237 percent of annual economic output last year, the most in the world, according to International Monetary Fund estimates.
While the unemployment rate fell to a four-year low of 4.1 percent in November, the rate among those aged 15-24 was 6.5 percent.
“Companies won’t increase hiring unless they’re convinced that the economy will keep improving for two, three or four years,” said Yoshiki Shinke, chief economist at the Daiichi Life Research Institute in Tokyo. “Growth expectations have weakened so much and it’s hard to change perceptions.”
Even with more central bank easing, most of the impact of Abe’s spending won’t spread far beyond public works projects, Citigroup Inc. (C) says. It estimates that 100,000 jobs will be created, compared with the government’s figure of 600,000. BNP Paribas SA (BNP) says 150,000.
University students attend a job fair in Tokyo. While the unemployment rate fell to a four-year low of 4.1 percent in November, the rate among those aged 15-24 was 6.5 percent. Photographer: Akio Kon/Bloomberg
Shinzo Abe, Japan's prime minister, announces the government's fiscal stimulus package in Tokyo on Jan.
11, 2013. Photographer: Haruyoshi Yamaguchi/Bloomberg
Abe Stimulus Risks Fizzling as Citigroup Sees Japan Job Deficit
Tomohiro Ohsumi/Bloomberg
“So far, Abe has presented no concrete remedies to reverse the southbound trend of Japan’s job-market,” said Takuji Okubo, chief economist at Japan Macro Advisors. “We can’t help but be skeptical about the employment outlook.”
“So far, Abe has presented no concrete remedies to reverse the southbound trend of Japan’s job-market,” said Takuji Okubo, chief economist at Japan Macro Advisors. “We can’t help but be skeptical about the employment outlook.” Photographer: Tomohiro Ohsumi/Bloomberg
“Fiscal stimulus is like morphine, because if you want to maintain the same level of effect you have to keep upping the dose,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “Japan has failed to achieve a sustainable economic expansion, and the country’s record proves the strategy is wrong.”
The yen remained higher after a two-day rally as investors weigh the likelihood of more easing by the Bank of Japan (8301) next week. The currency was at 88.39 per dollar as of 2:49 p.m, up 1.4 percent from this week’s low on Jan. 14. The Nikkei 225 Stock Average (NKY) fell 0.4 percent after sliding yesterday by the most in eight months.
Bond Yields
Yields on the 10-year government bond touched 0.73 percent, the lowest since Dec. 17. The benchmark sovereign debt yield is the lowest in the world after Hong Kong and Switzerland.JPMorgan Chase & Co. said today it sees Asian Development Bank President Haruhiko Kuroda as the main candidate to replace BOJ Governor Masaaki Shirakawa in April. Opposition leader Yoshimi Watanabe said in an interview yesterday that the next BOJ chief shouldn’t be a former central bank bureaucrat.
The Japanese government poured 33.8 trillion yen into stimulus measures in the 1990s, with 45 trillion yen added in the 2000s, according to estimates from BNP Paribas based on Finance Ministry data.
The average economic growth rate decelerated from 4.6 percent in the 1980s to 1.1 percent in the 1990s and 0.8 percent in the following decade, according to the brokerage.
More than a third of the spending package announced last week will go to disaster prevention and reconstruction after the March 2011 earthquake and tsunami. Extra spending will boost gross domestic product by about 2 percentage points, the government said.
Public Works
“There’ll be a positive effect on construction, but it won’t ripple out to other industries,” said Kiichi Murashima, Citigroup’s chief economist in Tokyo. “Companies are hesitant to expand payrolls until they’re sure demand will improve.’Low unemployment may be masking challenges as older workers exit the labor force and wages stagnate in a nation struggling to emerge from a third recession in five years.
Panasonic Corp. (6752) eliminated more than 38,800 jobs in the year ended September and said last week it may close some businesses. Renesas Electronics Corp. said today it will cut more than 3,000 jobs.
‘‘At stake is whether wages will rise,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management. “Abe will probably keep stimulating the economy through yen depreciation and fiscal spending, but that won’t induce a rebound in fundamentals that are crucial for jobs.”
Employment Downturn
The jobs-to-applicants ratio, a barometer of supply and demand, peaked in August and looks set for a cyclical downturn, according to Takuji Okubo, chief economist at Japan Macro Advisors and formerly of Goldman Sachs Group Inc. Wages have failed to rise for nine of the past 12 months.“So far, Abe has presented no concrete remedies to reverse the southbound trend of Japan’s job-market,” Okubo said. “We can’t help but be skeptical about the employment outlook.”
Citigroup predicts that economic growth will rise to 2.2 percent in the fiscal year from April before falling to 0.3 percent the year after. Nomura Securities Co. says growth will be 1.8 percent in the year from April and at 0.3 percent in the following 12 months.
Japan’s government debt probably climbed to 237 percent of annual economic output last year, the most in the world, according to International Monetary Fund estimates.
While the unemployment rate fell to a four-year low of 4.1 percent in November, the rate among those aged 15-24 was 6.5 percent.
“Companies won’t increase hiring unless they’re convinced that the economy will keep improving for two, three or four years,” said Yoshiki Shinke, chief economist at the Daiichi Life Research Institute in Tokyo. “Growth expectations have weakened so much and it’s hard to change perceptions.”
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