Monday, February 13, 2012

The elephant in the room..

Japan economy contracts amid strong yen and Thai floods

Try to create a prognosis for Japan - look at their massive govt debt, their 8% budget deficit (despite only paying 1% on the 10yr debt) look at their projections for population decline, and the growing needs of an increasingly aged population, and look at the likely impact of China on their export markets... Conclusion - Japan doesn't have a snowballs' chance in hell of getting the economic growth necessary to reduce their debt pile - and when the markets wake up to that, and their borrowing costs spiral, all hell will let loose, not just in Japan, but across the developed world - it could happen very suddenly...

Posted by uncle tom @ 07:16 AM (1174 views)
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6 thoughts on “The elephant in the room..

  • But they have something the rest of the world doesn’t have – the largest cumulative trade surplus of any country.

    When you have that kind of backstop, your debt is less of an issue than a hindrance to getting credit you simply don’t need.

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  • You’re thinking of something else nod. I’m talking about the cumulative BOP. All that spare money they built up over the years is still there, believe me.

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  • Paul,

    Much of that BoP surplus has been borrowed by the Japanese govt and spent – and they can’t pay it back..

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  • @UT

    No it hasn’t. That surplus was built up over decades and still very much exists according to official figures. Unless you mean the government borrowed … from itself? Which just defies economics.

    If you google ‘largest financial institution in the world’ and factor out the dollar base and I think you’ll be surprised with what you find.

    You do realise that the Japanese bankrolled both gulf wars and still provides the overwhelming majority of the world’s consumer and domestic electronics, cars (including hybrid systems), industrial heating systems and medical equipment, right?

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  • Paul,

    BoP surpluses don’t belong to govt, they belong to the companies trading in the countries concerned.

    You are way out of date re. Japan’s manufacturing status – China now dominates in many sectors, and is progressively under-cutting Japan’s manufacturing industries – try looking at a few gadgets – you don’t see ‘made in Japan’ that often now..

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