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Monday, March 05, 2012

Japan's economic problems in summary

Chris Martenson has released an interesting essay Japan Is Now Another Spinning Plate In The Global Economy Circus and provides a neat summary of the issues the country is facing:

-The total shutdown of all 54 nuclear plants, leading to an energy insufficiency

-Japan's trade deficit in negative territory for the
first time in decades, driven largely by energy imports

-A budget deficit that is now 56% larger than revenues (!!)

-Total debt standing at a whopping 235% of GDP

-A recession shrinking Japan's economy at an annual rate of 2.3%

-Renewed efforts underway to debase the yen

Efforts to weaken the currency are unlikely to be successful because in particular the USA is pursuing the same strategy.

Martenson supports the thesis made previously here:

"It is a very big deal that Japan is slipping into negative trade territory for the first time in three decades. Last spring I was writing about how the global flow of funds -- the massive tide of liquidity sloshing back and forth -- involved Japan to a large degree. Japan was the hub of a massive carry trade, was buying huge amounts of US Treasurys and, in general, was a vast emitter of liquidity flows to the world.

With its reconstruction costs and now with its trade deficit, Japan becomes a net consumer of funds. In other words, the flow of funds reverses. This represents, at the very least, a change to the global liquidity tide charts."