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Flying Dutchman

Japan Emerges From Recession.

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Japan has come out of recession after recording growth of 0.9% in the April-June quarter, compared with the first.

The economy had shown four consecutive quarter-on-quarter contractions.

Correspondents say that the rise is due to a huge government stimulus package and it is unclear whether the momentum will be sustained.

http://news.bbc.co.uk/1/hi/business/8204075.stm

I'm thinking they may have over-egged the pudding.

FD

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http://business.timesonline.co.uk/tol/busi...icle6798681.ece

Japan today emerged from its longest and most destructive recession since the Second World War as government stimulus measures at home and abroad finally began to pay off.

Japan’s GDP grew 0.9 per cent in the April to June quarter, with annualised real growth rate of 3.7 per cent, breaking a run of five consecutive quarters of contraction. However, stock markets across Asia tumbled since economists had expected the world's second largest economy to grow by 1 per cent in the second quarter.

The turnaround makes Japan the largest member of a growing club of developed economies that have managed to scrape their way back from successive quarters of economic contraction.

France and Germany last week became the first major European economies to make the leap back, while Hong Kong and Singapore have done the same in Asia.

In Tokyo, the market reacted with a downward lurch that took trading floors by surprise.

Brokers said that domestic investors had yet to be convinced that Japan’s recovery was sustainable, and many chose to take today’s news as an opportunity to lock-in profits after a two-week rally.

The Nikkei 225 Index was down more than 3 per cent at the closing bell. Other Asian markets took similar punishment, with Shanghai and Hong Kong both tumbling sharply.

Analysts said that Japan’s return to GDP growth could dramatically reshape the battle-lines in Japan’s general election, for which official campaigning has just begun with the ruling party heavily on the back foot.

Savaged by public opinion and on course to lead his Liberal Democratic Party to a historic defeat on August 30, Prime Minister Taro Aso will now be fighting with a significant success to his name: he promised earlier this year that Japan would be among the very first developed economies to claw their way back from recession.

However, several analysts said that Japanese GDP growth may not be sustainable without further stimulus from the government.

It's the global stimulus recovery, never another recession because govts will continually stimulate the economy.

Fill your boots because the recovery is here.

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I seem to remember the news bleating that its only a recession after two quarters of neg gdp, so how is it over after only one quarter of pos gdp?

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Not suprizing really, is it?

Japs and Jerry's can just turn the power back on to the factories and start building stuff again.

We on the other hand, can just winge and envious fingers at everybody else, whilst our plutocrats enjoy the good times.

This is Britain. Same as it ever was.

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I seem to remember the news bleating that its only a recession after two quarters of neg gdp, so how is it over after only one quarter of pos gdp?

Because the people getting the stats want recovery.

I agree it's insane that for a recession you need 2 quarters in a row contracting but for recovery it's only 1.

Apart from it's more political convenient to have this definition is there any technical reason for this?

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We in the UK should be very fearful of a global recovery.

With all that excess money sitting at the BoE on deposit because banks don't want to loan it out - in any recovery that could flood out and chase commodities like oil and other assets ramping up inflation at break neck speed. Even small nterest rate rises would spell armageddon for the property market because we would still have rising unemployment in the short term and very little employment growth in the medium-longterm because where would that growth come from?

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I though Japan has been in decline for 25 years....

Only when it supports the arguments of the doom-mongers. You've been here long enough to have learnt that by now.

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Has this got anything to do with it by any chance

http://www.guardian.co.uk/books/2007/may/1...iness.economics

The four iconic jobs in 21st-century Britain, according to a thinktank called the Work Foundation, are not scientists, engineers, teachers and nurses but hairdressers, celebrities, management consultants and managers.

One way of looking at Britain is as one big offshore hedge fund churning speculators' money while asset-strippers draw up plans for the few remaining factories to be turned into industrial theme parks.

The essence of successful ******** is that the really top-notch exponents not only manage to convince others but also manage to delude themselves

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Has this got anything to do with it by any chance

http://www.guardian.co.uk/books/2007/may/1...iness.economics

The four iconic jobs in 21st-century Britain, according to a thinktank called the Work Foundation, are not scientists, engineers, teachers and nurses but hairdressers, celebrities, management consultants and managers.

One way of looking at Britain is as one big offshore hedge fund churning speculators' money while asset-strippers draw up plans for the few remaining factories to be turned into industrial theme parks.

The essence of successful ******** is that the really top-notch exponents not only manage to convince others but also manage to delude themselves

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http://www.economist.com/businessfinance/d...e=features_box2

SUMMERS in Tokyo are renowned for their diabolical heat. But salarymen sweating from Fukuoka to Sapporo might take comfort in economic data released on Monday August 17th showing that Japan’s economy has warmed up a little too. The country, which previously suffered four consecutive quarters of contraction, grew by 0.9% between April and June compared with the previous quarter (or 3.7% at an annualised rate). It follows a massive 11.7% annualised slump in first quarter. The growth means that Japan is no longer technically in recession.

Celebrations will be muted, however. The modest rebound after such a punishing slump is nothing to get excited about, either for the country, or the ruling party, which faces what could be a historic defeat in elections on August 30th. And it is the result of a quirk, due in part to small upticks in production, exports and domestic sales following a year of hefty shortfalls. Moreover, the positive blip will do little to help the ruling Liberal Democratic Party’s (LDP’s) electoral chances.

Its candidates are likely to make a lot of the data when the short campaign officially starts on Tuesday—after all, the government had promised that the economy would rebound by the summer. But the party has presided over two decades of economic hardship during its almost 53 years in control, and disenchantment is running high. Opinion polls suggest that the LDP is likely to be beaten by the Democratic Party of Japan because of a wide set of failings, not just its economic (mis)management. Japan is still expected to perform the worst among the G7 group of rich countries and its economy may contract by as much as 6% this year, around twice the rate of America's, according to some forecasters.

Those who doubt the sustainability of the upswing note that, above all, it was technical in nature. After a period of destocking, inventories fell so low that an upswing in production was inevitable—indeed, it was widely forecast to happen as far back as January.

Furthermore, some of the growth is due to one-off government stimulus measures. Big public-works projects pumped money into the economy, and the government has been credited for the aggressive way that it threw cash at the crisis. But economic stimulus packages can not boost an economy forever in a country with a ratio of government debt to GDP that is close to 200%, the largest of any rich country. On the consumer side it also offered financial incentives for consumers to buy new, energy-efficient cars and appliances, as well as handing out ¥12,000 ($127) per person. Household consumption grew by 0.8% quarter on quarter.

But they are short-term fillips. Domestic demand is expected to decline as joblessness rises and wages fall. The unemployment rate hit 5.4% in June, near a post-war peak of 5.5% in 2003. And Japan has a shrinking workforce which weakens growth further. Consumer sentiment is improving slightly, but only after deep declines.

Falling prices are also putting a brake on consumption; the rate of deflation is actually increasing. At the same time, capital investment is expected to shrink this year and even fall by 7.9% in 2010, according to analysts at HSBC. Taken together, this bodes ill for the world’s second-largest economy. Heavily exposed to exports, Japan suffered when overseas demand shrivelled amid the downturn.

Rebalancing the economy towards domestic demand will be hard in Japan. Politicians are unlikely to countenance the sort of bold changes needed to stoke spending at home such as slashing the regulations that surround service industries, protecting them from competition. Farming too could be liberalised, as could heavily protected bits of the economy such as energy, transport, health care and education. The government’s claim that the worst may be over may be true. But any recovery is probably too late to save its skin.

Global recovery gathering momentum.

20 years on and the Japanese still haven't got out the debt hell.

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Because the people getting the stats want recovery.

I agree it's insane that for a recession you need 2 quarters in a row contracting but for recovery it's only 1.

Apart from it's more political convenient to have this definition is there any technical reason for this?

Out of interest, if Japan etc go negative again in the next quarter will it have to be 2 negative quarters before they are back in recession?

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Out of interest, if Japan etc go negative again in the next quarter will it have to be 2 negative quarters before they are back in recession?

For a technical recession yes.

http://waugh.standard.co.uk/2008/12/why-technical-r.html

Amid all the talk of "technical recession" (and fresh ONS growth figures out today may prove difficult for the Treasury), it is worth noting that the current definition is totally arbitrary.

Thanks to Peter Jay, the former British ambo in Washington and sometime BBC Economics Editor (a Pesto before Pesto) , we learn that the definition of two successive quarters of negative growth was dreamed up purely to get LBJ out of a political hole in 1967.

Like many, I had assumed the widespread use of this definition stemmed from some academic tome. But Jay appeared on Radio 4's Today prog at the ungodly hour of 6.15am (you may have missed it but that's well into my working day) to reveal that it was an artificial construct devised by Art Okun, Johnson's chairman of economic advisers.

Jay, who for some reason was in the room at the time, said LBJ was planning to run for re-election in 1968 and didn't like indications that there might be recession that year.

"Art had the neat idea that if we had a definition of recession which meant that people could say we are not actually in a recession, not technically, that would get the president out of a difficulty. So on the back of an envelope he invented the idea that in order to call it a recession you had to have had two consecutive quarters of negative growth."

"This was completely arbitrary. It was just a neat device by a clever economist trying to help his chief who was faced with a political challenge. It is entirely spin, entirely semantics. The whole argument about are we or are we not in recession in completely barmy. The rest of the world, as in so many things - often for good reasons - followed the United States."

Although you could argue Japan has been in a continual recession for 20 years.

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For a technical recession yes.

an old essay from 1969

link

We live in a world of euphemism. Undertakers have become "morticians," press agents are now "public relations counsellors" and janitors have all been transformed into "superintendents." In every walk of life, plain facts have been wrapped in cloudy camouflage.

No less has this been true of economics. In the old days, we used to suffer nearly periodic economic crises, the sudden onset of which was called a "panic," and the lingering trough period after the panic was called "depression."

The most famous depression in modern times, of course, was the one that began in a typical financial panic in 1929 and lasted until the advent of World War II. After the disaster of 1929, economists and politicians resolved that this must never happen again. The easiest way of succeeding at this resolve was, simply to define "depressions" out of existence. From that point on, America was to suffer no further depressions. For when the next sharp depression came along, in 1937–38, the economists simply refused to use the dread name, and came up with a new, much softer-sounding word: "recession." From that point on, we have been through quite a few recessions, but not a single depression.

But pretty soon the word "recession" also became too harsh for the delicate sensibilities of the American public. It now seems that we had our last recession in 1957–58. For since then, we have only had "downturns," or, even better, "slowdowns," or "sidewise movements." So be of good cheer; from now on, depressions and even recessions have been outlawed by the semantic fiat of economists; from now on, the worst that can possibly happen to us are "slowdowns." Such are the wonders of the "New Economics."

For 30 years, our nation's economists have adopted the view of the business cycle held by the late British economist, John Maynard Keynes, who created the Keynesian, or the "New," Economics in his book, The General Theory of Employment, Interest, and Money, published in 1936. Beneath their diagrams, mathematics, and inchoate jargon, the attitude of Keynesians toward booms and bust is simplicity, even naivete, itself. If there is inflation, then the cause is supposed to be "excessive spending" on the part of the public; the alleged cure is for the government, the self-appointed stabilizer and regulator of the nation's economy, to step in and force people to spend less, "sopping up their excess purchasing power" through increased taxation. If there is a recession, on the other hand, this has been caused by insufficient private spending, and the cure now is for the government to increase its own spending, preferably through deficits, thereby adding to the nation's aggregate spending stream.

The idea that increased government spending or easy money is "good for business" and that budget cuts or harder money is "bad" permeates even the most conservative newspapers and magazines. These journals will also take for granted that it is the sacred task of the federal government to steer the economic system on the narrow road between the abysses of depression on the one hand and inflation on the other, for the free-market economy is supposed to be ever liable to succumb to one of these evils.

All current schools of economists have the same attitude. Note, for example, the viewpoint of Dr. Paul W. McCracken, the incoming chairman of President Nixon's Council of Economic Advisers. In an interview with the New York Times shortly after taking office [January 24, 1969], Dr. McCracken asserted that one of the major economic problems facing the new Administration is "how you cool down this inflationary economy without at the same time tripping off unacceptably high levels of unemployment. In other words, if the only thing we want to do is cool off the inflation, it could be done. But our social tolerances on unemployment are narrow." And again: "I think we have to feel our way along here. We don't really have much experience in trying to cool an economy in orderly fashion. We slammed on the brakes in 1957, but, of course, we got substantial slack in the economy."

Note the fundamental attitude of Dr. McCracken toward the economy — remarkable only in that it is shared by almost all economists of the present day. The economy is treated as a potentially workable, but always troublesome and recalcitrant patient, with a continual tendency to hive off into greater inflation or unemployment. The function of the government is to be the wise old manager and physician, ever watchful, ever tinkering to keep the economic patient in good working order. In any case, here the economic patient is clearly supposed to be the subject, and the government as "physician" the master.

It was not so long ago that this kind of attitude and policy was called "socialism"; but we live in a world of euphemism, and now we call it by far less harsh labels, such as "moderation" or "enlightened free enterprise." We live and learn.

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http://www.time.com/time/magazine/article/...,919922,00.html

Monday, Dec. 11, 1978

Maverick Economist Alfred Kahn has a penchant for candor that is both refreshing and dangerous in Washington. When he said that there is the possibility of a "deep, deep depression" if inflation continues to soar, the President was furious. Kahn responded by purging the word depression from his vocabulary and instead using "banana." So he now says: "We're in danger of having the worst banana in 45 years."

Kahn never lets an opportunity for a quip pass him by. Commenting on the success of his profession, he gibes: "The Pope is telling economist jokes." Asked why he accepted the thankless job of trying to throttle inflation, he replies: "I'm 61 years old. What am I saving it for?" He is brutally frank about his chances for success. Says he: "My prediction [on the growth of the economy] isn't worth the air it rides on."

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an old essay from 1969

link

But pretty soon the word "recession" also became too harsh for the delicate sensibilities of the American public. It now seems that we had our last recession in 1957–58. For since then, we have only had "downturns," or, even better, "slowdowns," or "sidewise movements." So be of good cheer; from now on, depressions and even recessions have been outlawed by the semantic fiat of economists; from now on, the worst that can possibly happen to us are "slowdowns." Such are the wonders of the "New Economics."

"delicate sensibilities" :lol: One of those classic paragraphs that upon reading you don't know whether to laugh or cry.

WTF has happened to us. <_<

FD

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