Is Japan the Black Swan?

[Trembling Hand]

They'll begin an immigration program.

No they won't. They will commit huri kuri before they are forced to drop their xenophobic ways.

 

[FlyingFox]

They'll begin an immigration program.

From where?

 

[Uncle Festivus]

NOTE: this is how u present an arguement/idea Uncle Festivus, copy and pasting and bolding things doesnt represent original thought, opinion or understanding, it shows the opposite

So let's clarify this - if I post a qoute of a fact then shame on me because that is not an 'original thought', but if you post a link to somebody else's opinion or theory then that's OK??

 

[chops_a_must]

No they won't. They will commit huri kuri before they are forced to drop their xenophobic ways.

Here fishy fishy.

 

[white_goodman]

So let's clarify this - if I post a qoute of a fact then shame on me because that is not an 'original thought', but if you post a link to somebody else's opinion or theory then that's OK??

you can do what u want, no-one listens

 

[MARKETWINNER]

I saw following link today. Very interesting. They also want to invest more in stocks.

http://www.bloomberg.com/news/2013-...fund-cutting-local-bonds-to-buy-equities.html

Japan’s Pension Fund Cutting Local Bonds to Buy Equities

My ideas are not a recommendation to either buy or sell any security or currency. Please do your own research prior to making any investment decisions. Please note that I do not endorse or take responsibility for material in the above hyper-linked site.

 

[white_goodman]

http://marketmonetarist.com/2013/06/13/mr-kurodas-credibility-breakdown/

cant try and hit inflation then cry when bond yields rise and stop the party

 

[sinner]

http://marketmonetarist.com/2013/06/13/mr-kurodas-credibility-breakdown/

cant try and hit inflation then cry when bond yields rise and stop the party

I thought there was an established relationship between the size of the monetary base as a % of GDP, and short term rates?

Copying John Hussmans idea here, I took some data from the World Bank to make the below chart. Moving back to 2% deposit rates implies a significant reduction in the size of M2 or similarly significant growth in GDP. Considering the unlikely nature of the BoJ reducing the size of their balance sheet, or sustained economic growth momentum in the Japanese economy, my only question for the Bernankes and Kurodas of the world is

How?



History implies that if anything, recent BoJ actions will drive the time cost of money even lower.

 

[Trembling Hand]

Japan Exports Surge

Japan’s exports surged by the most since 2010 as the yen weakened and shipments to the U.S. jumped, boosting Prime Minister Shinzo Abe’s campaign to revive the world’s third-largest economy.
Overseas shipments increased 10.1 percent from a year earlie

 

[Uncle Festivus]

Japan Imports Surge

Japan’s trade deficit rose nearly 10 percent in May to 993.9 billion yen (nearly $10.5 billion) as rising costs for imports due to the cheaper yen matched a rebound in exports, the Ministry of Finance reported Wednesday.

Japan trade balance came to a deficit of 994 billion yen in May as the boost to exporters from a weaker yen and a pick up in global demand was overshadowed by high energy import cost.

Exports to the United States rose 16.3 percent to 1041 billion yen, while exports to the debt-ridden European Union declined 4.9 percent to 529 billion yen.

Japanese imports rose 10 percent yoy to 6762 billion yen, up for a seventh consecutive month.

 

[Knobby22]

They have a lot of infrastructure to rebuild. Placing the orders early? Also updating equipment to raise supply?
Not necessarily a bad thing.

 

[Uncle Festivus]

Increasing cost of imports of raw materials & fuel while exporting cars to the US paid for with non-revolving credit, at the same time US exports become less competitive? How long will the US let this go on for? Just collateral damage/noise from the current trade/currency wars.

Just a little bit more to go for Abe?

 

[CanOz]

Japan has just recently started to really flood with liquidity...China on the other hand has been flooding the country with liquidity for longer and is in the midst of a huge bubble in fixed assets. I think the Blk Swan has more of a chance to appear in Chinda than Japan...

CanOz

 

[Uncle Festivus]

Japan has just recently started to really flood with liquidity...China on the other hand has been flooding the country with liquidity for longer and is in the midst of a huge bubble in fixed assets. I think the Blk Swan has more of a chance to appear in Chinda than Japan...

CanOz

Who's gonna blink first

 

[CanOz]

Who's gonna blink first

The world is awash with debt and that analogy about "the best horse at the glue factory" is really getting some use. The problem is, you'll be better off to have you money with the best horse when things go pear shaped, but which horse is the best? Is it still the US?

CanOz

 

[sinner]

Was just poking around on FRED looking for some Japan data and remembered this thread.

Now if we recall the previous argument on this thread was essentially whether or not Abenomics would raise rates (under the assumption that long rates are a proxy for inflation/growth expectations):

Abenomics is trying to RAISE interest rates NOMINALLY, but look at REAL rates... higher long term bond yields indicate inflation expectations and growth expectations, this is the aim..

Now, admittedly back in 2013 I was a little wet behind the ears on this stuff, but from my understanding an increase in nominal rates requires a reduction in the size of CB balance sheet relative to GDP. That implies a necessary balance sheet reduction or increase in GDP.

History implies that if anything, recent BoJ actions will drive the time cost of money even lower.

Let's take a look back, with the power of data! The fun all started in Apr 2013, so these charts are all plot from Jan 2013 to current. I'm not trying to start an argument, but interesting to look at the charts with the benefit of hindsight.

First up, rolling (monthly) YoY percentage change in BoJ total assets. Huge balance sheet expansion here:


Next up, rolling (quarterly) YoY percentage change in Japan GDP. Unfortunately not enough growth there to allow an increase in nominal rates based on the relationship highlighted in my previous post:


and of course, the proof being in the pudding, 10Y JGB rates (short term rates are even worse), we can see the relationship did hold true, as the balance sheet of the CB expanded, rates (time cost of money) declined even further:


Rolling (monthly) YoY percentage change in CPI. Yay inflation! But, if we think about it for a second, this means that real GDP growth negative since mid 2014 and real interest rates negative basically since Abenomics started:


So where did it go?


Now this might make me seem bearish on Japan or whatever, but taking a step back to look, Japan hasn't done too bad:
* Raised asset prices
* Loosened monetary policy
* Boosted nominal GDP
* Weakened currency vs consumer partner currencies like EUR and USD
* Strengthened or maintained currency vs producer partners currencies like AUD and critical industrial imports like oil.
* Didn't lose significant JPY value to gold.

Could've been worse.

 

[Trembling Hand]

Could've been worse.

There is always tomorrow.