Consumption Decline in Japan

My friend Eddie Lee mailed me this morning about this news:


Japan's retail sales unexpectedly fell for a second month, reducing the likelihood that consumer spending will accelerate and lead to an increase in the lowest interest rates among the world's seven biggest economies.

Receipts at retailers fell a seasonally adjusted 0.2 percent in October from a month earlier amid warmer-than-usual weather, the trade ministry said today. Sales of winter clothes and electronics led the decline.

The retail ``report does make it somewhat more difficult for the bank to move because things aren't exactly adding up,'' said Jan Lambregts, head of Asian research at Rabobank International in Hong Kong. ``The Bank of Japan is taking an optimistic view on the economy.''

Now as Eddie says "i just found it a little amusing ..."

".. Bank of Japan Governor Toshihiko Fukui ``doesn't have the ammunition to back up'' a December interest-rate increase, said Kirby Daley, a currency strategist at Societe Generale Group's Fimat unit in Hong Kong. ``We are continuing to make excuse after excuse after excuse for why the consumer isn't coming to the table and it constantly is the weather in Japan.''

... ``The newspapers are saying that the economy is recovering, but that hasn't filtered down to households yet,'' said chain store association spokesman Masahiro Watanabe. Declining receipts at the nation's supermarkets are due more to restraint on the part of consumers than price competition, he said."

Exactly, something other than the weather is at work here, and the Japanese Stock Market seems to sense this:

Asian stocks fell, led by Honda Motor Co., on concern sales are slowing in the U.S and Japan. Li & Fung Ltd., a clothing supplier to American retailers, contributed to the Hang Seng Index's biggest points decline since the Sept. 11 terrorist attacks.


And following the line of thought expressed in Eddie's sense of humour, I couldn't help chuckling to myself at this point:

"``It's unavoidable to adjust interest rates in order to sustain economic growth for a long time,'' the BOJ's Fukui said today at a meeting of business executives in Nagoya, central Japan."

I was chuckling since what he was presumably trying to tell the poor guys who had assembled to listen to him was that afahic it is unavoidable to *raise* rates, whilst what they may well have been wanting to hear is that given weak consumption it is, in their view, unavoidable to go back to ZIRP.

Really Japan is becoming the big test for all the various imbalance theories. Once people finally accept what is actually happening in Japan vis-a-vis rising median age and consumption then the whole global picture will have to adjust, since these ages are set to go up even further and don't look set to come down again anytime this side of 2050, if ever. Meantime you can almost hear the pain as the neurones grind away while people try to figure this amazingly simple detail out.