16-05-2003 21:47									#1
	Japanese Deflationary Spiral... Inflate your Upload Space

Year-on-year inflation has come in at -3.5%. This seems a bit drastic and worrying to me. It seems like the Japanese have just given up on the issue.

http://news.ft.com/servlet/ContentS...p=1012571727088

The economy didn't grow at all over the last quarter.

	16-05-2003 21:49									#2
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Is this a Rol... never mind.

	16-05-2003 21:51									#3
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After so many years of decline and stagnation, I think that the new technology in telephone and such may build something significant, and also the drastic treatment of their auto industry is possibly producing some effect.

	16-05-2003 22:00									#4
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They've known what they have to do to get out of this for at least 10 years now. The Japanese political establishment just won't deregulate and open up the economy so a slow doneward spiral is the best they can hope for.

It's to bad really.

	16-05-2003 22:01									#5
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It would seem to be extremely difficult for any business to do well in this environment. Toyota seems to be one of the few Japanese companies that can actually make a profit.

	16-05-2003 22:05									#6
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How will this affect Japanese imports and exports? Will Toyota's become cheaper here in the States?

	16-05-2003 22:06									#7
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Nissan also has nicely recovered and is now making profits.

	16-05-2003 22:12									#8
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I think that most Toyotas sold in the States are assembled here in the States using Japanese and American parts. So even if the price were to go down, it wouldn't be that far of a drop.

Re their imports and exports, Japan imports/exports only slightly more than does the US (surprise, surprise)--only about 12% of their economy, IIRC. However, the impact of that 12% is magnified by the fact that most of those exports are industrial goods rather than services. Industry comprises 25% of Japan's economy, much more than the US' ~15%. Industry has been suffering deflation worldwide, especially in the industries that are Japan's stock and trade.

This is a post-industrial world we're living in...

	16-05-2003 22:15									#9
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quote: Originally posted by DanS It would seem to be extremely difficult for any business to do well in this environment. Toyota seems to be one of the few Japanese companies that can actually make a profit.

A few month's back Business Week had a big spread on Japan's deflaition. It seems companies such as Sony and Toyota are just breaking even at home and all of their profits are coming from overseas. Also when you say Japan exports more do you mean they export more as a percentage of GNP? I am 90% certain that the US is still the world's largest exporter (and importer as well).

	16-05-2003 22:18									#10
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Sony's profits are pathetic. Might as well stick your money in your mattress.

	16-05-2003 22:24									#11
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I am 90% certain that the US is still the world's largest exporter (and importer as well).

Yes, as a %-age of GDP. My bad.

	16-05-2003 22:25									#12
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Oerdin: Didn't you say you are going to live in Japan? That is rattling around in my brain somewhere...

	17-05-2003 00:25									#13
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Does this mean Japan is going to become a cheap shopping opportunity then? I'd love to pick up some hightech consumer goods or, say, Osaka cheaply.

	17-05-2003 00:47									#14
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i know nothing about economics but... since inflation is generally seen as a negative thing, wouldn't deflation be a positive?

	17-05-2003 00:50									#15
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i guess the problem is in having less money is circulation means less investment, less purchases, and less business growth... but still, isnt inflation worse?

	17-05-2003 01:07									#16
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Think about it speer baby, you're in a deflationary spiral. Why buy today what's gonna be cheaper to buy tomorrow? Have this logic keep up for a decade and that's a lot of people simply not buying stuff.

	17-05-2003 01:12									#17
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It looks to me like Japan, Inc. need a major tax cut.

	17-05-2003 01:13									#18
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quote: Year-on-year inflation has come in at -3.5%. This seems a bit drastic and worrying to me. It seems like the Japanese have just given up on the issue. http://news.ft.com/servlet/ContentS...p=1012571727088 The economy didn't grow at all over the last quarter.

Year on year Japan's GDP has grown by 2.7%, that's faster then the US. (domestic demand grew by 2.3%, so it isn't just exports)

quote: It would seem to be extremely difficult for any business to do well in this environment. Toyota seems to be one of the few Japanese companies that can actually make a profit.

Nissan, Honda, Canon, Fast Retailing...

quote: Sony's profits are pathetic. Might as well stick your money in your mattress.

1$ billion in the quarter ending December last year.

quote: I think that most Toyotas sold in the States are assembled here in the States using Japanese and American parts. So even if the price were to go down, it wouldn't be that far of a drop. Re their imports and exports, Japan imports/exports only slightly more than does the US (surprise, surprise)--only about 12% of their economy, IIRC. However, the impact of that 12% is magnified by the fact that most of those exports are industrial goods rather than services. Industry comprises 25% of Japan's economy, much more than the US' ~15%. Industry has been suffering deflation worldwide, especially in the industries that are Japan's stock and trade. This is a post-industrial world we're living in...

I don't see why the composition of GDP or exports matters. A service sector isn't by definition more advanced than a manufacturing sector and an economy with a proportionally larger service sector isn't by definition wealthier. (Japan is still richer than the UK for instance, by all measures of GDP)

	17-05-2003 01:21									#19
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quote: i know nothing about economics but... since inflation is generally seen as a negative thing, wouldn't deflation be a positive?

No, it isn't.

quote: i guess the problem is in having less money is circulation means less investment, less purchases, and less business growth... but still, isnt inflation worse?

Depends on the circumstances. In the present economic conditions, both deflation and high inflation are bad things.

	17-05-2003 01:23									#20
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Japan keeps the yen artificially low, so thats one of the reasons why they have a current account surplus.

	17-05-2003 02:31									#21
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Thats the problem with people that made money as merchandice. You'll get some cycles and all differences from normal would give you big shock.
You have still need to buy food, so no problem. Computer industry was in deflation several years and still exist.

Last edited by raghar on 17-05-2003 at 02:43

	17-05-2003 02:35									#22
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japan doesn't need a tax cut. although it is high, so i can't see it hurting if they did do it.

no, what japan really needs is an administration with enough balls to actually make some reforms.

then again, the only asian country that did that was skorea, but that's only because they would have completely collapsed if they hadn't. japan's got a while to go before a collapse, so...

	17-05-2003 02:39									#23
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quote: Originally posted by DanS Oerdin: Didn't you say you are going to live in Japan? That is rattling around in my brain somewhere...

Hmm, nope not me. I've been to Japan and I like the country but I'm going to be sticking around California for the forseable future.

	17-05-2003 02:53									#24
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quote: Originally posted by Oerdin Hmm, nope not me. I've been to Japan and I like the country but I'm going to be sticking around California for the forseable future.

Last I heard Japan was one of the most heavily regulated markets on Earth. It's currently in something of a catch 22; the banks are on the verge of collapsing because so many companies are bankrupt or cannot pay their bills. Many of these loans were originally made due to government pressure (the government had targeted certain industries for growth and they pressured the banks to lend money at very favorable rates to those sellected industries) or where secured using realestate or stocks (the value of both has fallen off of a cliff).

The banks can't lend any more because then they'll be bankrupt for sure but businesses can't grow without access to capital. So now what do you do? Do you let foreign banks in? The Japanese government doesn't want to go to far down that road or else the competetive pressure will push the domestic banks over. Do you put the bankrupt companies out of business knowing that will mean the majority of your banks will fail or do you do nothing?

The Japanese, by and large, have choicen to do nothing. They've tinkered around the edges but the system has largely stayed the same.

	17-05-2003 21:44									#25
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Year on year Japan's GDP has grown by 2.7%, that's faster then the US.

That doesn't seem right. Could you recheck your numbers?

1$ billion in the quarter ending December last year.

$820 billion loss in the quarter ending March this year.

I don't see why the composition of GDP or exports matters.

Because the overseas competition in manufacturing is particularly fierce nowadays.

Re Honda and Canon, yes they seem to make respectable profits. But there are so many companies that make hardly any profit at all.

Last edited by DanS on 17-05-2003 at 21:54

	17-05-2003 21:59									#26
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quote: Originally posted by chegitz guevara How will this affect Japanese imports and exports? Will Toyota's become cheaper here in the States?

Not necessarily. The price of Toyotas are different in each country. The price of cars in the US will depend on the US market.

	17-05-2003 22:03									#27
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Reckon it will happen in the EU too. Too strict an inflation target, in addition to strengthening Euro...

	17-05-2003 22:06									#28
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Why can't the Japanese government drastically increase demand? AFAIK, the financial situation for the Japanese government is still superb. Why not increase spending, and order some immense project, say... a decent space program.

	17-05-2003 22:08									#29
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Gosh, why hadn't they thought of that one before!

	17-05-2003 22:11									#30
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Japan needs some direct involvement in their economy. Monetary stimulus may not be working becuase of the banking situation. The govt should get into the loaning business. I believe Germany is considering this. If banks wont make the loans a market failure exists, so the govt must step in. That, and some govt spending on infrastructure if there are any possible projects.

Right now the Japanese seem ready to accept deflation. I predict big problems if they do. I don't think the banks are going to initiate the recovery. They are going to wait until the financial situation improves.