Tuesday, July 26, 2016

What’s Wrong With Japan’s Economy? - Bloomberg

Personally, I think pretty much everything is wrong with Japan's economy, but why don't you let Bloomberg tell you the facts instead of me?

Here are my 2 favourite stats from the article:

In 3 years, the BOJ have expanded their balance sheet from 34.5% of GDP (which is honestly ridiculous enough to begin with) to a massive 80.6% of their GDP (and it is slowly increasing). This is very unsurprisingly to me since the BOJ is the top 10 shareholder of 90% of the Nikkei 225 and also owns 55% of their entire ETF market.

Which is of course no wonder why their Debt to GDP ratio is an eye popping 246.6%. If you're holding on to any JGBs, I wish you the best of luck. I hope that you will even get repaid, but that might mean getting back Yen that is worth a fraction of what it is today. With such massive debt, the ONLY option is devaluation.

The 3 solutions that Bloomberg proposes are silly. Japanese people are already working until such an old age and they are already paying rather high taxes (compared to many other places in Asia). This is definitely counter-intuitive to the only solution that makes sense, which is to attract and accept immigrants.

I've talked about it before, the problem in Japan is systematic. It's not just one or two things that needs to be fix that will overhaul the country. Perhaps the most damning thing about them is also their most charming, which is their iron grip hold on their culture. Aversion to foreigners and many things foreign still run deep with many Japanese. Unfortunately, they are going to make a perfect textbook example of why a country has to adapt to globalization and the cons of not doing so.

I listened to Paul Krugman talk about Japan recently. Before, I thought that he was just an out of touch academic. Now, I can say for certain that he is completely batshit crazy. His recommendation to Japan is to have EVEN MORE STIMILUS to reach this so call "take-off" velocity, after which the country will be all hunky dory. The main argument that he has in "nothing bad has happened yet, so that means the current policy can be pushed even harder".

Madness, sheer madness. Krugman. Japan. All of them.

1 comment:

  1. The market is volatile on Tuesday with the Nifty below 8650.


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