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Friday, May 29, 2009

Bits and Bobs on the Latest Data from Japan

By Claus Vistesen: Copenhagen

It appears that there is still some green shoots left in the news from Japan even though the underlying picture is one of deteriorating fundamentals. We learned recently how Q1 was absolutely horrid in Japan with out declining at an annualised 15.2% which, I a dread to say, are numbers normally reserved to the likes of the Baltics, Ukraine and Hungary [1]. The second quarter will no doubt offer some improvement and the second derivative is likely to be all over the Q2 data in general. However, the real question is what kind of recovery or stabilisation we will observe and as Edward pointed out recently those two things are not the same and what we most likely to see is the latter and not the former.

In Japan the green shoots crowd soldier on with the news that industrial production showed second consecutive month of expansion in April. Output consequently rose a healthy 5.2% from March and factories are estimated to continue the increase in production throughout May and June.

Japan’s industrial output surged the most in 56 years in April as a rebound in exports helps the economy emerge from its worst recession since World War II. Production rose 5.2 percent from March, the second monthly gain, the Trade Ministry said today in Tokyo. The increase was faster than the 3.3 percent economists estimated, and companies said they planned to boost output in May and June as well.

The yen gained on speculation funds will flow into Japan as the economy resumes growing after last quarter’s record contraction. Still, output is running at two-thirds last year’s levels, saddling manufacturers such as Nikon Corp. with workers they no longer need and driving the jobless rate to a five-year high of 5 percent.

I am skeptical as to the underlying dynamism here in the sense that Japanese companies are still cutting inventories both on a monthly and annual basis which suggest that companies are not expecting a vigorous uptick in future demand. Moreover, the annual print of industrial production restored the depression discourse by clocking in at a healhy 31.2 % contraction.

In the context of inflation the news confirmed that Japan is having none of the green shoots from its domestic market. Consequently, prices continued their deflationary trend with the general index as well as the index stripped from fresh food decining -0.1% from a year earlier. The core-of-core price index on the other hand which strips out headline inflation slumped to an annual -0.4% drop which suggests, yet again, the extent to which Japan lacks the domestic "gusto" to produce anything resembling a recovery. In this vein, household consumption expenditures declined by 1.3% over the year in April and analysts, in general, are none too positive about the prospect of domestic demand in Japan picking up anytime soon, (from Bloomberg);

“The Japanese economy is entrenched in deflation, if we define it as continuous price declines,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Given the economy’s weakness, it’s hard to anticipate consumer prices will reverse course and allow the central bank to exit from its very accommodative monetary policy.” Consumers may delay purchases if they expect goods to get cheaper, eroding corporate profits and forcing firms to cut wages. Japan only emerged from a decade of deflation when prices started to rise in 2005.

Core prices in Tokyo, the nation’s capital, fell 0.7 percent in May from a year earlier, the biggest drop in six years, according to the report. It was the first decline since September 2007.

To add injury to insult, Japan's jobless rate increased by o.2% from March and thus reached the 5% mark. The outlook especially in the manufacturing sector looks bleak with all major industrials such as e.g. Toyota, Nikon, Canon etc looking at very harsh times and production cuts to scale down to the slump in demand for their products. Bloomberg reports that the number of people receiving unemployment insurance increased a massive 59.1% which means that 793.000 people are now receiving such funds.

In the midst of such news one can only feel symphatetic, yet skeptic, that government handouts of 12000 yen to households (Ricardian Equivalence anyone?) and cutting high way tolls will have anything but a comestic impact on the incoming data from the domestic demand side of the economy.

Ok, so this was a small update on the state of affairs in Japan. A little bit of green shoots, but mostly a picture of steadily deteriorating fundamentals and more importantly a picture which confirms that any kind of stabilisation in Japan will be markedly deflationary if it is not accompanied by vigorous external demand. Gee, I wonder why that may the case ...

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[1] - The last country here was originally "Bulgaria", but as a commenter pointed out this would not be appropriate here. Actually, I meant to write Hungary and god only knows why the keyboard punched out Bulgaria in stead. Sorry for that one.

Wednesday, May 27, 2009

Japan Exports Flat In April

Japan’s external trade held steady in April, although since exports were up ever so slightly on March (13 trillion yen) while imports were down slightly (45 trillion yen) the country did post a slightly larger trade surplus than in March (69 trillion yen, over 10 trillion yen in March).

Nontheless year on year the numbers, while slightly better than in previous months, still look horrible. Shipments abroad fell 39.1 percent from a year earlier, after dropping 45.5 percent in March and a record 49.4 percent in February. From a month earlier, exports rose 1.9 percent on a seasonally adjusted basis, a the second straight monthly gain.




Imports fell 35.8 percent from a year earlier, the ministry said, and the trade surplus was down year on year by 85 percent.

Sales to Europe were down 45.4 percent year on year, from 56.1 percent in March, and indeed exports to Europe were up 50 trillion yen (around 10%) on the month.


Shipments to the U.S. fell 46.3 percent last month, down from March’s 51.4 percent decline, but month on month they were stationary, with the declining annual decrease due entirely to what are known as base effects.


Shipments to China, which is now Japan’s biggest trade partner, fell 25.8 percent in April from a year earlier. The rate of decline thus fell for a third straight month, suggesting Beijing’s $585 billion stimulus package is having an effect, at least as far as Japan exports go. Month on month exports to China we more or less stationary, but they are up around 60% from January's low point. In fact shipments to China are now about a third larger than those to the US, and 40% larger than those to the EU.


Among shipments to China, the Finance Ministry singled out chemicals used to make plastics, mobile phones and digital cameras as actually rising in April from a year.



While there is no doubt that sentiment has begun to improve in Japan’s largest Western markets, it is far from clear that global demand will recover at this point enough to allow Japanese companies to go beyond restocking after a heavy run-down of inventories. And like Japan, China’s economy is driven mostly by exports, so unless we see a stable pickup in global demand recovery there will remain limited. And with US financial markets now funding a large chunk of the carry trade, the yen seems trapped around 95 to the dollar as far ahead as we can see. And all of this, of course, bodes ill for Japanese companies.

Export performance across Asia has been mixed recently. Shipments abroad fell at a slower pace in Taiwan and South Korea last month from March, but both Singapore and China suffered larger drops. Two quarters of record contractions in GDP have now shrunk the Japanese economy to around the 2003 level. Even as declines in overseas shipments moderate, Japan is exporting little more than half as much as last year and producing a third less. And the recession is now spreading to consumers as companies fire workers and cut wages to minimize losses.

Nonetheless Bank of Japan Governor Shirakawa is putting on a brave face, and said this week that the economy may return to growth in the current quarter, although he immediately qualified this by underlining that any recovery will “inevitably be mild.” At their April 30 meeting, a few Bank of Japan board members even went so far as to say that additional policy measures weren’t necessary amid the signs that the economy will recover, albeit gradually and after “some time,” according to the minutes released last week. Since the Bank of Japan has got a track record of underestimating the severity of the recessions which have struck since 1992 let's just hope that history isn't repeating itself again this time.

Tuesday, May 26, 2009

A case of need

where the need for markets for its industrial sector is causing Japanese leaders to reconsider a longstanding policy. Nikkei is reporting that the Japanese government has decided to lift its ban on arms exports by domestic companies.

"TOKYO (Nikkei)--The Japanese government decided Saturday to relax its rules on arms exports to allow more joint development and production of weapons with other nations and enable shipments to countries with which Japan co-develops arms. The move is aimed at reducing procurement costs and stimulating the domestic defense industry by promoting joint development and production of key arms, such as next-generation fighter jets, with the U.S. and Europe."

Warships, aircraft, armored personnel carriers, UAV's, missiles...these are all things that Japan's excess industrial capacity could be reconfigured to produce relatively quickly. As economic conditions remain difficult, we can expect to see changes in long-held attitudes as national leaders search for alternative markets for idle production capacity.

According to Wikipedia's entry on the Defense Industry of Japan, the country's "indigenous suppliers [have] developed and produced an almost complete range of modern equipment, including aircraft, tanks, artillery, and major surface and underwater naval combatants". The same source indicates that historically "Nearly 60 % of Japanese defense contracts were awarded to five large corporations: Mitsubishi Heavy Industries, Toshiba Corporation, Mitsubishi Electric Corporation, Kawasaki Heavy Industries, and Ishikawajima-Harima Heavy Industries Corporation. "

As an indicator of the potential for growth, the Wikipedia source references "A secret memorandum circulating among defense contractors in 1988 estimated that lifting the export ban would result in Japan's capturing 45 % of the world tank and self-propelled artillery market, 40 % of military electronic sales, and 60 % of naval ship construction".

In particular, the Mitsubishi F-2 has been put into service as a successor to the F-16. This aircraft might make inroads in the international market if the manufacturer was allowed to make foreign sales.

The need for new markets will likely overcome domestic political opposition to foreign arms sales.

Thursday, May 21, 2009

Japan's Economy Contracts At An Annualised 15.2% In The First Three Months Of 2009



Japan’s economy shrank at a record rate last quarter as exports collapsed and businesses drastically cut back on investment spending. Gross domestic product fell by an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, according to the Japanese Cabinet Office. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.



Japan's economy is exports dependent, and exports fell by an unprecedented 26 percent during the last quarter, forcing most companies to drastically cut production. In fact industrial output was down 18.1% on the previos quarter and 34.5% year on year.



GDP fell 4 percent on a seasonally adjusted basis, more than double the 1.6 percent drop in the US, and well above Europe’s record 2.5 percent contraction. Due to the impact of deflation, without adjusting for price changes Japan's economy actually shrank 2.9 percent in nominal (current price) terms in the quarter.



Weaker domestic demand was the biggest contributor to the decline, reducing GDP by 2.6 percentage points, the most since 1974. But this was unevenly distributed between consumer demand and investment. Consumer spending held up reasonably well - and only dropped by 1.1 percent (see chart above) while business investment was down a record annual 10.4 percent, and a massive 35.5% over the last quarter. And companies are likely to keep cutting spending because the decline in external demand has left factories operating well below capacity level, and semi idle workforces can only be retained for so long.



“There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.”


The slump in housebuilding has also deepened, and home construction was down by 25% quarter on quarter.




Shrinking More Slowly?

A number of reports over the past month suggest that the contraction in what is still the world’s second-largest economy may slow (second derivative decrease) for the first time in a year this quarter) as exports begin to stabilise (albeit at a low level) and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, has some effect.

The most recent Nomura/JMMA Japan Manufacturing Purchasing Managers Index reading rose to a seasonally adjusted 41.4 in April from 33.8 in March, the steepest gain since data were first compiled in October 2001. However the index remained below the 50 threshold that separates contraction from expansion for the 14th straight month.




The Economy Watchers index, a survey of barbers, taxi drivers and others who deal with consumers, climbed to 28.4 in March from 19.4 in February, the second-biggest jump on record, according to the Japanese Cabinet Office.



Japan’s consumer sentiment alos rose - to a five-month high - in March, and the confidence index climbed to 28.9 from 26.7 in February. The index has now advanced for three consecutive months since after plunging to 26.2 in December, its lowest level since the government began compiling the figures in 1982.



Exports also increased in March from a month earlier, as firms across the globe who had run down stocks started to rebuild them.



Still, the failure of export demand to do more than simply stabilize will probably limit the scope of Japan’s recovery. Toyota, Hitachi, and Panasonic have all recently forecast continued production and job losses in the current business year. Panasonic said only last week it plans to close about 20 factories this year and proceed with the 15,000 job cuts announced in February.


Paul Krugman, speaking as far as I can see at a seminar in Ho Chi Minh city, had the following to say, which I pretty much agree with.

“Just about all of the economic indicators out there are suggesting that the free-fall has come to an end, that we’ve stabilized,”

“Probably the worst in terms of shocks to the system is over.....The acute stress that we had last fall after the failure of Lehman has been reduced,” he said. “Interest-rate spreads on commercial paper are way down, interest-rate spreads on corporate debt are down a little bit. The spread on interbank lending is down....“I don’t think we’ve hit bottom, but the bottom is not too much further below us,” he said. “My big concern is that we don’t hit the bottom and bounce, we hit the bottom and stay there. It’s not obvious where recovery comes from.”


It's like someone hit a very sensitive mechanical device with a large sledgehammer, this sent the device reeling under the impact smashing a lot of the works in the process, and now the shock absorbers have done their work and the vibrations are slowing we will be able to assess the true extent of the damage.

He also seems to be warning the US dollar can experience a "Japan-style carry" effect.

“The U.S. dollar is going to fall quite a lot, or at least significantly,” he said. “The demand for dollars has been temporarily inflated by the crisis. Good news is actually bad news for the dollar. If things stabilize, then the safe-haven demand for dollars falls off.”


So the second derivitive is falling. We should not see more 15.2% annual contractions in Japan, but this does not mean GDP will not keep on falling -for how long? This is the part we still don't know.

Japan's loss of AAA rating

The quote from Moody's is

"Japan's credit profile is Aa2

The unified rating of Aa2 reflects Japan's considerable strengths. These include Japan's large domestic savings, a strong home bias on the part of its domestic financial institutions and institutional investors, relatively low holdings of government debt by foreign investors, and Japan's $1 trillion of official foreign exchange holdings. Moody's believes the domestic market will absorb the record level of bond issuance this year to fund the government's economic stimulus program. However, the rating also reflects the risks of Japan's high level of debt, which leaves the country's fiscal position vulnerable to shocks or imbalances that would cause a sharp rise in interest rates. The ratings also reflect the sizable but temporary increase in the government's budget deficit caused by the severe effects of the global collapse in trade and recession on the Japan's economy. Further, Japan's large foreign exchange reserves, although large compared to those of most other countries, are only a small fraction of its liabilities and could not alone eliminate refinancing risk at a time of severe stress."

Here is a look at the trend in Japan's government debt(courtesy of Edward Hugh):

japan debt

That net debt number is likely to exceed 100% of GDP in 2009. Moody's noted that very little of this debt is held by non-Japanese. Of course, one of the primary causes of this is the fact that much of this debt was issued at extremely low interest rates. So it was relatively unattractive to foreign investors. Japan's government debt amounts to the country's citizens avoiding taxation now with the expectation that the country's future productivity will be great enough support repayment of the debt in the future without ruinous taxation levels.

The Bank of Japan holds over $600 billion in US Treasury debt. In theory, the proceeds from these holdings as they mature could be used to reduce the outstanding domestic debt over time. Of course, that would put upward pressure on the yen versus the dollar and thereby weaken the country's export sector. The decision that faces Japan's leadership today is whether to continue to depend on exports, or shift policy to supporting the domestic sector more and thereby increasing the proportion of GDP generated domestically. Such a shift would result in short term difficulties, but in the long run would serve the Japanese public best.

Other weaknesses of Japan include the fact that it has no meaningful defense forces, and its agricultural sector cannot produce enough to feed the country's population for any meaningful length of time. Also, Japan relies on imported fuels for over 80% of it's energy needs.

Another issue is that somehow the fact that Japan has been running inflationary policies for 18 years now is easy to miss when their nominal numbers all are so flat. It was easy to see the inflation get exported to the US and the rest of the world through the carry trade mechanism. The question that doesn't seem to be asked is where all of those yen went after the carry trades were unwound. At some point the BoJ has to remove the excess yen, which would obviously be deflationary, or we should expect a collapse in the yen.

(A cross post by Scott Peterson from Wasatch Economics)

Wednesday, May 13, 2009

Japanese Housewives Back in the Game?

By Claus Vistesen

I am sure all investors, analysts, and commentators have been tracking a wide range of indicators to gauge whether the shoots of green would continue to spark or whether it was merely a blip on the way down. Clearly, this has been and is a little more than a blip I think and for my own part, decisive evidence came today that things might have changed. I am of course talking about the Bloomberg report (also here) that Japanese housewives are once again making their presence felt in currency markets playing the carry wheel.

Individual investors in Japan increased bets to the most in six months that the yen will weaken as the economy stabilizes, jumping back into a trade that was all but wiped out last year.

Businessmen, housewives and pensioners held 153,326 margin contracts at the end of last month that will make money if the yen declines against currencies ranging from the euro to the Australian and New Zealand dollars, according to the Tokyo Financial Exchange. All told, they may have as much as $125 billion in yen so-called short positions, RBC Capital Markets strategists said. “Investors believe the worst of the global recession is over and higher-yielding currencies are bottoming out,” said Yoshisada Ishide, who oversees $1.8 billion as a Tokyo-based fund manager at Daiwa SB Investments Ltd., a unit of Japan’s second-biggest investment bank.

Now, I have had my eyes on the Japanese housewives on more than one occasion (especially here) because I think that the tendency of Japanese retail investors to scour the global economy for yield runs a bit deeper than a simple carry trade play. Well, it is of course a carry trade but the underlying impetus for Japanese retail investors to act as they do also has something to do with a decline in home bias due to a low domestic interest rate environment as a result of demographics and subsequent sluggish domestic demand. The point is simply that one of the only ways Japan can achieve sustained is to mobilize its large stock of savings and, more importantly, to mobilize it abroad (e.g. through the purchase of samurais) in order to get the yield which is not obtainable in the domestic capital markets.

In the current environment of financial crises, great depressions, and credit crunches Ms Watanabe et al. have of course, in line with most other risky asset punters, been pulling back their fangs. However, with the recent narrative of green shoots and second derivatives it was also always going to be the question of when, if at all, carry trading would return as per function of declining volatility and appreciation of risky assets. As I have suggested lately, tentative signs have emerged that carry trading activity has slowly been coming back.

Now, it can be debated whether the apparent return of the Japanese housewives to the carry trough represents evidence of a solidification of the green shoots or, as a friend suggested to me, a contrarian indicator that things will soon hit the fan again. This particular friend of mine is an investor, so you are probably better off listening to him than me. There is also the small question of the targets for Ms. Watanabe's allure in the form of the usual, OECD, suspects such as the Kiwi, the Aussie, and the Euro.

Looking at the chart to the right the recent three months which have been marked heavily by the green shoots discouse, it is quite obvious to see that the JPY has depreciated accross the board against the usual suspects. It is difficult to say whether MS. Watanabe has had a hand in this, but more interestingly is also the fundamental question of where the carry trade activity is going to be conducted in the future?

Specifically, it will be interesting to see whether there is going to be a change in the game whereby the OECD economies currently engaged in QE and with subsequent credible commitments by the central bank to keep rates low become funding for a carry trade to exploit the potentially "low volatility" growth (yield) in places such as India, Brazil and Turkey. Clearly, the BOJ has the mother of all credible commitments here in the sense that nominal interest rates have hardly budged the zero bound for more than a decade even in the midst of booms. This last point need careful watching I think as well as of course we might as well get another bout of volatility which could fold the, after all, fragile green shoots.

So, it does indeed seem as if the Japanese housewives are back in the game, but another fundamental question is whether the housewives ever left the game. This is to say that we need to look at structural long term outflows as well as more short term punting in order to really understand the what drives MS Watanabe and her fellow Japanese retail investors.

Thursday, May 07, 2009

Japan's Economic Contraction Stabilises In March

Japan's contraction showed signs of easing in March, even though the recession has now set in for the duration, the deepest point may well have been passed. The ship may be stable, but it is still far from being right side up.

Industrial Output Up On The Month

Japan's industrial output rose in March (more than anticipated), and showed the first gain in six months, suggesting that the steepness in the plunge in production and exports may be softening. The rise followed a record 10.1 percent fall in industrial production in January and a 9.4 percent drop in February. Manufacturers also forecast further gains in production in the coming months, suggesting output may be bottoming out after the sharpest decline on record in the first quarter of the year.




Industrial production rose 1.6 percent in March, more than the 0.8 percent rise forecast by the economic consensus. In the monthly ministry survey manufacturers stated they expect output to rise 4.3 percent in April and 6.1 percent in May.




This impression is also confirmed by the latest Nomura/JMMA Japan Manufacturing Purchasing Managers Index reading, which rose to a seasonally adjusted 41.4 in April from 33.8 in March, the steepest gain since data were first compiled in October 2001. However the index remained below the 50 threshold that separates contraction from expansion for the 14th straight month.



Japan is currently passing through its worst recession since World War Two. Following a 3.2 percent slump in the fourth quarter the economy is expected to contract even more in the first quarter, despite some tentative signs of a softening in the contraction. Exports, for example, rose in March over February, the first month on month expansion since September last year.



Retail Sales Fall Again In March


Japan’s retail sales fell for the seventh consecutive month in March, and were down by 3.9 percent from a year earlier in non price adjusted terms. This follows a 5.7 percent drop in February - the steepest pace of decline since February 2002. From a month earlier, seasonally adjusted retail sales dropped 1.1 percent in March, to record their sixth straight monthly decline.



With the economy in such a sharp contraction, and unemployment rising, families are obviously apprehensive about the future, and have been spending less. Average monthly household spending declined 0.4 percent from the previous year in March, according the Ministry of Internal Affairs and Communications. The average household spent 310,680 yen ($3,186). This follows much steeper annual declines of 3.5% and 5.9% in February and January respectively. So, in line with other indicators, the household spending picture did improve slightly in March, and retail sales were not falling as fast as they had been.




Confidence among Japanese small traders rose to an eight-month high in March, adding to signs that the economic situation improved somewhat. The Economy Watchers index, a survey of barbers, taxi drivers and others who deal with consumers, climbed to 28.4from 19.4 in February, the second-biggest jump on record, according to the Japanese Cabinet Office.



Japan’s consumer sentiment alos rose - to a five-month high - in March, and the confidence index climbed to 28.9 from 26.7 in February. The index has now advanced for three consecutive months since after plunging to 26.2 in December, its lowest level since the government began compiling the figures in 1982.




However, Japanese wage earners' total cash earnings fell at the fastest rate in nearly seven years in March from a year earlier, as companies worked desperately to cut costs. Overtime pay fell a record 20.8 percent from a year earlier as many Japanese manufacturers stopped factory lines following the plunge in global demand. Total cash earnings fell 3.7 percent to 273,561 yen ($2,805) in March, the largest fall since July 2002, when wages fell 5.7 percent. It followed a revised 2.4 percent drop in February. Both disposable income and real wages have been falling sharply since the start of 2009.





Deflation Setting In Again


Japan’s consumer prices - as measured by the general index - fell for the first time in more than a year in March, a sure sign that deflation is resolutely raising its ugly head again. The general index fell by 0.3%, while consumer prices excluding fresh food declined 0.1 percent from a year earlier. The core core index - excluding both food and energy - also fell 0.3%. Bank of Japan Governor Masaaki Shirakawa argued last week that he sees little risk of a deflationary spiral, even though the BoJ policy board forecast that consumer prices will drop 1.5 percent this fiscal year and 1 percent in the year starting April 2010.

Unemployment On The Rise

Japan's unemployment rate jumped to 4.8 percent in March, the highest level in more than four years. The total number of unemployed people rose by around 670,000, or 25 percent, from a year earlier to 3.35 million in March. The unemployment rate, which was 4.4 percent in February, is now the highest since August 2004, although it is still below the post-World War II high of 5.5 percent last seen in April 2003.



But behind the headline unemployment numbers, a very significant restructuring would seem to be taking place in the labour force. If we look at the charts below (which shows the size of the "regular" - permanent contract - labour force, as well as movements in the employment of full time and part time workers), it is evident that there was a sharp drop in the regular workforce (around a million) between December and January. Since total employment did not reflect this change, it would seem that there was a significant change in the form of contract (structural reform) and this increase in temporary and part-time employment would seem to be reflected in both earning figures and spending patterns.









The Japanese economy is set to shrink by 3.3 percent this fiscal year according to the latest government forecast, and by 6.1 percent in 2009 according to the IMF spring forecast. Finance Minister Kaoru Yosano said last week that the economy remains in “crisis” as the slump in exports and factory output evidently will continue to take a toll on employment. Prime Minister Taro Aso's Cabinet recently submitted a massive supplementary budget to finance a new stimulus package. Aso has called for a record additional 15 trillion yen ($155 billion) in government spending, equivalent to about 3 percent of Japan's gross domestic product. The government argue the newest stimulus package will help protect the economy from slipping further while laying the foundation for future growth, including incentives for buying "eco-friendly" cars and home appliances. It also provides support for the unemployed and small businesses. However, despite such bold claims the Japanese governments hands are most firmly tied by the very large levels of existing debt (see chart below), with the IMF forecasting that Net debt will rise to 103.6% of GDP in 2009, and gross debt to a staggering 217% of GDP. So basically, however much the current stimulus package may serve to soften the blow of the downturn in global trade on Japanese households any real recovery will have to await a recovery in global trade, and despite all the current talk of "green shoots" everywhere, we are still some way from being able to perceive this at this point.