Bloomberg News columnist William Pesek has added to the increasing skepticism about the policies of Prime Minister Shinzo Abe to revive the stagnant and ailing Japan economy.

When shall real substantial and bold structural reforms be pushed, so that Asia's second biggest economy can be saved, in order for the future and long-term stability of Asia and the world to become better?


(This image below sourced  from fedupusa.org)




(Image of Prime Minister Shinzo Abe below sourced from guardian.co.uk)





(Image below sourced from cnbc.com)






(Image below sourced from politicallyillustrated.com)





Here is the thought-provoking analysis of William Pesek of Bloomberg News:

Paul Krugman’s Worn-Out Ideas for Japan

By William Pesek Jan 25, 2013 6:00 AM GMT+0800

 

Let’s get over this honeymoon for Japan’s new prime minister, Shinzo Abe, and do a reality check on his idea that the economy is about to boom now that voters have returned him to office.

At first, I wondered if I had lost my bearings. Was I just hopelessly cynical after 11 years in Tokyo, watching a numbing parade of inept leaders come and go as the Liberal Democratic Party pledged change that never arrived? The steps Abe has taken in the first few weeks of his latest premiership restored my faith in the merits of skepticism.

 

William Pesek is based in Tokyo and writes on economics, markets and politics throughout the Asia-Pacific region.

Abe’s big idea, the one that has investors feeling the most bullish on Japan since 2009, is fiscal pump-priming and getting the Bank of Japan to do more to stimulate growth. About 21 percent of respondents to a Bloomberg poll now see Japan as offering the best opportunities over the next year. The same poll showed 54 percent are more optimistic than pessimistic about what some are calling Abenomics.

Those numbers are hard to ignore on two scores. First, I only hope that those in charge of managing my retirement accounts aren’t among the Japan-bulls-come-lately. The second is how short memories can be. Abe, remember, failed miserably in his first term as prime minister in 2006-2007.

Walker Economy

Abe’s LDP spent almost 20 years building bridges, roads, tunnels, dams and airports to nowhere and forcing the central bank to add liquidity to the banking system to end deflation. And what did those unimaginative policies leave Japan’s 126 million people with? The easy answer is the world’s highest ratio of debt to gross domestic product. The harder one: Japan has become a nation that can’t proceed without the economic equivalent of a walker.

That image takes on a deeper meaning when you consider Japan’s awful demographics and the dearth of ideas to cope with them. Take Finance Minister Taro Aso, who this week said elderly people should “hurry up and die” to relieve pressure on the government to pay for health care.

So is it really plausible that with just one more try of the same old remedies, Abe’s team will get the economy to walk on its own and then sprint ahead? Seriously?

No economist could formulate a credible list of every shot of stimulus and every dose of monetary steroids that officials have pumped into the economy since the early 1990s. There have been too many overlapping treatments to document. None of them, not a single one, achieved what investors are betting Abe will do this time: make a Japanese recovery self-sustaining.

Fooling Investors

Deflation won’t end until Japanese consumers believe it will. Companies won’t hire until they think households will boost spending. Banks won’t lend until they assume loans won’t go bad. Wages won’t rise, supporting the expectations of these three pillars of the economy, until there is genuine confidence that 2013 or 2014 will be better than 2012.

This gambit may fool some investors, and it even got a plug from Nobel-winning economist Paul Krugman. It is true that Japan probably will get a quick GDP jolt. The yen is down and stocks are up. Japanese have seen this movie before, though, and suffered through sequel after sequel.

Abe isn’t offering anything new. Aside from a weaker yen, does he have a plan to make Japan more competitive to take on China or halt Sony Corp.’s slide toward irrelevance? How about ideas to make the labor force more flexible and international, starting with a new immigration policy? Or a strategy that inspires young Japanese to start new companies or families? What about freer trade? Increasing women’s role in politics and business? Even an energy plan that champions something other than the nuclear reactors Japanese fear amid earthquake risks? ]

None of the above. What Abe’s party fails to grasp is that Japan’s challenge is structural, not financial.

Surely that’s the message BOJ Governor Masaaki Shirakawa was aiming for this week. Abe talked about browbeating the central bank into a 2 percent inflation target. Shirakawa’s response? Yeah, maybe in a year. By then, Abe will have replaced Shirakawa, whose term expires in April, with a more agreeable official. But the BOJ’s smackdown is a reminder that monetary policy only goes so far when an economy is hobbled by dysfunction.

The LDP’s policies are like a religion with a fixed set of beliefs that have little utility in today’s world. The party’s dogma was fine before 1964, the year the Tokyo Olympics wowed a world that thought Japan couldn’t rise so quickly from the wreckage of World War II. The policy obsolescence became obvious once the bubble economy of the 1980s crashed.

Things are changing all around Japan. Yet officials in Tokyo refuse to embrace the world of 2013, assuming that the canon that delivered Japan the highest per-capita incomes in Asia is still viable. This faith that Japan is just one huge spending package away from bliss is becoming more detrimental with each passing year and credit downgrade. Abenomics really is more religion than reality.

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:

Abe’s Stimulus May Trigger Japan Default, Fujimaki Says

By Monami Yui & Yumi Ikeda - Jan 15, 2013 4:27 PM GMT+0800

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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.

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Fujimaki Japan Inc. President Takeshi Fujimaki

Fujimaki Japan Inc. President Takeshi Fujimaki. Fujimaki Japan Inc. via Bloomberg

Fujimaki Japan Inc. President Takeshi Fujimaki. Fujimaki Japan Inc. via Bloomberg

“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.

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.

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Abe Stimulus Risks Fizzling as Citigroup Sees Japan Job Deficit

Akio Kon/Bloomberg

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.

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

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Japan's prime minister Shinzo Abe

Haruyoshi Yamaguchi/Bloomberg

Shinzo Abe, Japan's prime minister, announces the government's fiscal stimulus package in Tokyo on Jan. 11, 2013.

Shinzo Abe, Japan's prime minister, announces the government's fiscal stimulus package in Tokyo on Jan.

11, 2013. Photographer: Haruyoshi Yamaguchi/Bloomberg

Enlarge image

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

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.

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.”

Dark clouds in world horizon? Japan entering troubling economic recession?

My Comments:

For over a generation, Japan's economy has stagnated and has been a drag on the world economy. What was once a catalyst of Asian progress has now become a huge problem for our region, and also for the world. Japan and its people still have innately admirable Confucian values of discipline, love of learning, social unity and orderliness, how can this Asian country recover its economic vitality?

What social, economic, moral, political and other reforms are needed to revitalize the world's third biggest economy so that world economic growth can be accelerated too?

What can Japan leaders do to make it be like Germany, not only in terms of robust economic dynamism but also in truly normalizing relations with former World War II foes South Korea and China by implementing German-style government atoning for and rectifying its war errors, so that Japan can have a clean break from the past similar to what the dynamic and vibrant nation of Germany has done?

Why has Japan not adjusted well to new international geo-political and economic realities of the 21st century similar to the more successful Asian neighbors South Korea, Taiwan and Singapore?













Here is a news report from Bloomberg, which I want to share:

Robots-to-Cosmetics Profit Slump Adds to Japan Woes: Economy

By Keiko Ujikane and Masahiro Hidaka - Nov 8, 2012 12:52 PM GMT+0800

Slumping profits at Japanese manufacturers from robots to cosmetics threaten to weigh on investment and wages, adding to the likelihood of recession after the economy probably contracted last quarter.

Gross domestic product shrank an annualized 3.4 percent in the three months through September, according to the median estimate of 17 economists surveyed by Bloomberg News. That would be the steepest decline since the earthquake-affected first quarter of 2011. The data is due Nov. 12.

Robots-to-Cosmetics Profit Slump Adds to Japan Economy Woes

Automobile engines pass beneath Fanuc Corp. robots as they move along the production line inside the new Opel assembly plant, a unit of General Motors Co., in Szentgotthard, Hungary on Thursday, Sept. 20, 2012. Photograph: Akos Stiller/Bloomberg

The economy’s decline mirrors an aggregate 34 percent drop in net income at the 171 companies listed on the Nikkei (NKY) 225 Stock Average to report July-September earnings through yesterday, according to data compiled by Bloomberg. Japanese machinery orders fell more than estimated in September, separate data showed today, while a boost in payrolls in Australia and rising unemployment in New Zealand highlight the diverging fortunes of economies in the region.

“Today’s data show Japan’s economy is probably in a recession,” said Tatsushi Shikano, a senior economist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Widespread deterioration in corporate profits is taking its toll on capital spending and there is nothing to suggest a firm recovery is coming back soon.”

The Nikkei was down 1.6 percent at 1:22 p.m. in Tokyo. The index has declined 12.5 percent since the start of the fiscal year on April 1, compared with a 2.1 percent decline in the Dow Jones Industrial Average (INDU) and a 2.9 percent advance in the Stoxx Europe 600 Index (SXXP) over the same period. The yen was at 79.86 per dollar, around 6 percent from its postwar high.

Orders Decline

The 4.3 percent decline in Japanese machinery orders, an indicator of capital spending, compared with the median forecast for a 2.1 percent drop in a survey of economists by Bloomberg News. The nation’s current account surplus was 503.6 billion yen in September, the narrowest for the month since at least 1985, separate data showed today. On a seasonally adjusted basis, the nation posted its first current account deficit on record.

Nomura Securities Co., Goldman Sachs Group Inc. and JPMorgan Chase & Co. cut their third-quarter GDP forecasts last week after September exports dropped and industrial production fell the most since last year’s earthquake. Nomura expects the deepest decline -- an annualized 5.1 percent contraction --while all three see GDP shrinking again in the fourth quarter.

In other global releases today, the European Central Bank will probably leave its benchmark interest rate at a record low of 0.75 percent and President Mario Draghi will speak to reporters. The Bank of England decides monetary policy, Greece reports unemployment for August and Germany and the U.K. release trade data for September.

U.S. Trade

In the U.S., the trade deficit probably widened in September, a Commerce Department report may show. The U.S. also reports weekly initial jobless claims.

In the Asia-Pacific region, Indonesia and Malaysia are forecast to keep interest rates unchanged. Australian employers boosted payrolls more than economists forecast in October and New Zealand’s unemployment rate unexpectedly rose last quarter to a 13-year high.

The Bank of Japan (8301) remains under pressure to add to monetary stimulus after it expanded its asset-purchase program for the second time in two months last week. Some BOJ board members said in an Oct. 4-5 meeting that the economy may have entered a “recessionary phase,” the minutes of the meeting showed.

Spending Constrained

Prime Minister Yoshihiko Noda’s room for fiscal maneuvering has been limited by the political opposition’s refusal to give his administration the authority to borrow to pay for this year’s deficit. On Oct. 26, the government said it would tap discretionary funds to pay for 750 billion yen in fiscal stimulus and Finance Minister Koriki Jojima said yesterday the government will take more steps to tackle current “severe” economic conditions.

Sharp Corp. (6753) and Panasonic Corp. (6752) expect to lose a combined 1.2 trillion yen ($15 billion) this fiscal year, while industrial robot maker Fanuc Corp. (6954) missed its forecast and cosmetics company Shiseido Co. (4911) plans to cut costs.

Honda Motor Co. (7267) and Nissan Motor Co. (7201) cut their full-year profit forecasts by a fifth after sales in China, the world’s largest auto market, fell amid a territorial dispute. In Japan, industrywide car sales declined in September for the first time in a year and were down again in October as government subsidies for fuel-efficient vehicles ended.

“Exports are weakening and consumption is losing steam, both of which are hurting growth and making companies reluctant to spend,” said Yoshiki Shinke, chief economist at Daiichi Life Research Institute.

Falling Exports

Japanese exports in the first 20 days of October were down 5.1 percent from a year earlier, the country’s customs authority said today.

Capital spending probably dropped 1.7 percent in the third quarter from the previous three-month period, according to the Bloomberg News survey, the biggest fall since 2009. Wages haven’t risen since April.

Dainippon Screen Manufacturing Co. (7735), a maker of chip equipment, said on Nov. 5 it now expects to swing to a full-year loss due to lower investment by semiconductor manufacturers. Fanuc, the world’s largest maker of controls that run machine tools, reported on Oct. 25 that its net income dropped as manufacturers in Japan and abroad pare spending on new equipment.

Sharp, Panasonic and Sony Corp. (6758), which all posted record losses last fiscal year, are cutting jobs and closing production lines in a bid to return to profitability. Shiseido, Japan’s largest cosmetics maker, on Oct. 31 said it will cut costs in the next two fiscal years and limit new hiring after its net income fell by 45 percent in the six months through September.