Wednesday, December 24, 2008

Japan needs to start a “Marshall Plan” to aid America

Japan Should Scrap U.S. Debt; Dollar May Plummet, Mikuni Says

"Japan should also invest in U.S. roads and bridges to support personal spending and secure demand for its goods as a global recession crimps trade, Mikuni said... Combining debt waivers with infrastructure spending would be similar to the Marshall Plan that helped Europe rebuild after the destruction of World War II, Mikuni said... Japan will also have to accept that a stronger yen is good for the country in order to reduce excessive trade surpluses and deficits, he said...The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo unless Japan takes “drastic measures” to help bail out the U.S. economy, Mikuni said. "

Posted by mountain goat @ 07:41 PM (1321 views)
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7 thoughts on “Japan needs to start a “Marshall Plan” to aid America

  • Marshall plan? Martial law more like. The owners of the private central banks are carving the country up and putting it under the ownership of central banks (controlled by the same players) or companies owned by those same concerns abroad.

    http://au.youtube.com/watch?v=lkKbE9qCzQo

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  • The curtains are on fire and the exit is looking awfully small.

    “It’s difficult for the U.S. to borrow its way out of this problem,” Mikuni, 69, said in an interview with Bloomberg Television broadcast today. “Japan can help by extending debt cancellations.”

    Jubilee for America by Japan, forced by a pending currency dislocation?

    Uh, just one question – what’s China going to think of that?

    market-ticker

    Does the Far East have an opinion on the UK’s level of debt? Watch this space.

    Send in the bailiffs – sorry, wrong thread.

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  • Great article,I love these ones.So there is an acceptance that external holders of american debt need to take part in trade and allow the US to work there way out, but unfortunately there is now no time to do so in an orderly way,and so the need for a mass spending.
    This seems like a great idea to reduce the imbalances but whether the US will be happy with foreign ownership of basic infrastructure, or whether Japan will be happy to blow their savings on giving the US a commercial advantage remains to be seen.
    I think the Japanese wont view this so disfavourably because the original Marshall plan was a key component in establishing the US as the No.1 post-war power. On the other hand, Japanese exports are down 25% this year and they are in terrible trouble themselves,so are hardly in a position to help the US out.
    Also, given that the Japanese government holds US debt because of monetising privately held US debt through yen printing, then probably removing the only way of soaking up the excess yen when inflation finally takes off could be a time bomb.
    Dont forget, if the Japanese -do- ever start spending then they will immediately run straight into major inflationary problems, because it immediately tips into excess demand->price rises, same as for Germany,hence their reluctance to do any kind of stimulus.

    Central banks foreign reserves are a method of localling inflating through exporting deflation, so if all central banks foreign reserves could be run down then we wouldnt have such a global problem. Anyway, the fact that this is even in thenews, particularly something as widely read as Bloomberg gives away the factthat game over for existing US position.

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  • any idea what the impact of this might be on JPY vs GBP? not that i’m sitting on a £30k upside on Yen at the mo and starting to wonder when the wheels might come off…..

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  • stillthinking,

    Great comments, thanks. The Marshall Plan was a military/political necessity to prevent Europe from turning Communist. Japan has no such concerns about America. Rather, their main interests lie in protecting their dollar reserves from being inflated away by the Fed; in protecting Japanese jobs; and maintaining or increasing Japanese economic strength. Unilaterally cancelling the debt would only have a small effect unless China etc chip in too.

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  • You’re right about the risk of inflation in Japan. If they start spending, and more importantly if they start taking on credit, then we could see a massive house price boom in Japan. I suspect the government is aware of the risk though and wouldn’t let it happen.

    Not so sure about Germany. They have less control over credit because of the Euro. However they’ve been overdue a HPB (sic) since the fall of the Berlin Wall, now it’s looking less likely again.

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  • The Japanese government just announced a 1 trillion dollar (of yen) stimulus. The effect on the yen remains to be seen. If the population at large prefers to save then the effect will be limited.
    I dont think there will be a take off of casual credit a la Brits , with storecards and such like, for the reason that Japan is cash based. Also, rents are much much lower(admittedly with smaller flats) so there isnt such a strong idea of renting being dead money, because it isnt a very big proportion of take home pay.
    I think that the Japanese situation will resolve itself whenthe current boomer bulge shuffles off the mortal coil and releases their fundsto a shrinking inheritance base ie.the saved wealth will all end up with one reasonably spoilt child. That is several decades away. Strange though, because the whole population is sittingon wealth that would be impossible to offload without rampant inflation, yet nobody is blinking.

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