Gosh, I certainly hope this isn't anything too serious:
Japanese stocks plunged on Wednesday after the Tokyo Stock Exchange announced that it would suspend trading of all stocks because volumes were too high. The news panicked investors, who had already sent the Nikkei down heavily in the wake of Monday evening’s government raid on Livedoor, the internet services company, over possible violation of security laws.
As Bloomberg points out, this has been a bad week for Japanese shares:
A rout in Japanese stocks deepened before trading was halted prematurely for the second time in the Tokyo Stock Exchange's history, helping to wipe away more than $300 billion in value from the world's second-largest equity market this week.
I certainly hope that all this will stop where it is.
But it does highlight the way in which people have been irresponsible (Economist please note!) with the Japan sustained-recovery story. Much of the investment in Japan stocks has been from overseas investors of late (the Jpanese have rather been buying US assets), people (especially it seems Middle East oil producers) are over-extended and if there isn't a sustained recovery soon then there will be a correction. I just hope the correction won't be too sharp, but after Italy this is clearly the number 2 global danger-spot where we could anticipate trouble at some stage.
OTOH it is hard to blame this particular one on central bankers and their "excessively low interest rates", indeed my argument would be quite the contrary: all the BoJ spin on 'the imminent end to deflation' and the 'ending of monetary easing' is part of what has been fueling the excessive optimism, an excessive optimism which is reflected in over-priced share values.
Meantime the latest European news from the FT reads: European stocks set for sharp sell-off.
Japan Real Time Charts and Data
Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Japan related comment. He also maintains a collection of constantly updated Japan data charts with short updates on a Storify dedicated page Is Japan Once More Back in Deflation?
Wednesday, January 18, 2006
Monday, January 16, 2006
Japan: The Third Way?
As its population ages, Japan should carve out a middle way between the social security systems of Scandinavia and that of the US, this at least is the opinion of finance minister Sadakazu Tanigaki, one of several contenders to replace Junichiro Koizumi as prime minister.
At the moment, benefits and tax payments were out of kilter ..“Japanese people are enjoying excessive benefits with a low [tax] burden, and passing on their debts to their children and grandchildren.” If Japan wanted to maintain mid-level benefits, its people would have to shoulder a mid-level burden, he said, referring to the fact that the population began to decline last year. “We need to engage in a nationwide debate on reform of the tax system as a whole, including consumption tax.”
In fact none of this will constitute a 'free lunch', and Japan now faces some hard. even stark, choices. One little commented point is that as interest rates were raised if deflation were to end (which I don't actually think it is about to) the Japanese governement would begin to incur ever larger service charges on that enormous debt it has. Which is one more reason the politicians are in no hurry to see the BoJ end the 'easing policy'.
At the moment, benefits and tax payments were out of kilter ..“Japanese people are enjoying excessive benefits with a low [tax] burden, and passing on their debts to their children and grandchildren.” If Japan wanted to maintain mid-level benefits, its people would have to shoulder a mid-level burden, he said, referring to the fact that the population began to decline last year. “We need to engage in a nationwide debate on reform of the tax system as a whole, including consumption tax.”
In fact none of this will constitute a 'free lunch', and Japan now faces some hard. even stark, choices. One little commented point is that as interest rates were raised if deflation were to end (which I don't actually think it is about to) the Japanese governement would begin to incur ever larger service charges on that enormous debt it has. Which is one more reason the politicians are in no hurry to see the BoJ end the 'easing policy'.
Tuesday, December 20, 2005
This Seems To Be Important
The Japanese finance ministry seems set to unveil plans to cut new government bond issuance by more than 10 per cent - to below Y30,000bn ($258bn) - in the year to April 2007. The Financial Times has the story. They had better hope they are reading the situation aright, since if they aren't they are heading straight back into recession. This is what all the battle with the BOJ is about. 2007 is rapidly getting pencilled into my diary as an economic annus horribilis.
Mr Koizumi considers that the economic recovery, about to enter its fifth year, is robust enough to withstand a mild fiscal contraction, although he on Monday came out against a consumption tax increase for at least two years.
Sadakazu Tanigaki, the finance minister, said: “I think we can break down the barrier of Y30,000bn.”
Japan has been running a budget deficit of about 6 per cent of gross domestic product, including interest payments on public debt of about 150 per cent of GDP. Mr Tanigaki is keen to accelerate the process of regaining primary fiscal balance, before interest payments, by the first years of the next decade.
The finance ministry will make cuts by, among other things, trimming payments made to doctors and further bearing down on public works spending, which has fallen by a quarter since Mr Koizumi took office in 2001.
Mr Koizumi considers that the economic recovery, about to enter its fifth year, is robust enough to withstand a mild fiscal contraction, although he on Monday came out against a consumption tax increase for at least two years.
Sadakazu Tanigaki, the finance minister, said: “I think we can break down the barrier of Y30,000bn.”
Japan has been running a budget deficit of about 6 per cent of gross domestic product, including interest payments on public debt of about 150 per cent of GDP. Mr Tanigaki is keen to accelerate the process of regaining primary fiscal balance, before interest payments, by the first years of the next decade.
The finance ministry will make cuts by, among other things, trimming payments made to doctors and further bearing down on public works spending, which has fallen by a quarter since Mr Koizumi took office in 2001.
Right Royal Row Over the BOJ
Things down at the Bank of Japan are hardly calm these days. On one version of events (see yesterdays Tankan) Japan is about - finally - to emerge from deflation, and the BoJ naturally enough wants to 'normalise' monetary policy. The politicians however are non-too clear about this:
"Japan’s ruling Liberal Democratic party will on Thursday urge the Bank of Japan to tie its monetary policy to nominal gross domestic product in an effort to lock in the central bank’s ultra-loose monetary stance for as long as possible."
"The proposal, which marks an escalation in tension between Japan’s politicians and the independent central bank, aims to stimulate above-trend economic growth for up to five years."
"Japan’s ruling Liberal Democratic party will on Thursday urge the Bank of Japan to tie its monetary policy to nominal gross domestic product in an effort to lock in the central bank’s ultra-loose monetary stance for as long as possible."
"The proposal, which marks an escalation in tension between Japan’s politicians and the independent central bank, aims to stimulate above-trend economic growth for up to five years."
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