A sharp economic retrenchment has not only been visible in China but in Japan as well
From Bloomberg,
Japan’s retail sales fell more than economists forecast in July as a winding down of government subsidies for car purchases threatens to further damp consumer spending in coming months.
The 0.8 percent decline from a year earlier was the first drop in eight months and compared with the median estimate of a 0.1 percent fall in a Bloomberg News survey of 13 economists. From a month earlier, sales slid 1.5 percent, according to data released by the trade ministry in Tokyo today. Cooler weather played a role, the government said.
Weakness in consumer demand and declining exports may make it harder for the government to prevent the economic contraction forecast for this quarter by Bank of America Merrill Lynch and Credit Suisse Group AG. Most of 274.7 billion yen ($3.5 billion) of subsidies for purchases of fuel-efficient cars is spent, with RBS Securities Japan Ltd. saying the program may run out of money next month.
“We can expect a plunge in spending in the fourth quarter because of the end of eco-car subsidies,” said Masamichi Adachi, a senior economist at JPMorgan Securities in Tokyo and a former central bank official…
Television purchases declined after a boost a year earlier from digital broadcasting replacing analog, while beer sales slipped because of cooler weather, the ministry said. Fast Retailing Co. (9983), the seller of Uniqlo brand apparel, says lower temperatures have crimped demand for summer clothing. Car sales, meanwhile, gained 32.5 percent from a year earlier.
“The government should try to boost growth momentum through immediate fiscal stimulus,” said Takahiro Sekido, a strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo and a formerBank of Japan (8301) official. “In the second half, we will see a further slowdown in private consumption as a reflection of global uncertainty.”
Private consumption accounts for about 60 percent of Japan’s gross domestic product.
In today’s world, mainstream's logic has been emblematic of the theatre of the absurd.
The Bank of Japan (BoJ) has implemented serial expansion of her balance sheet in line with her Western contemporaries since 2008.
The BoJ lately upped her asset purchasing program to 45 trillion yen ($564 billion) from 40 trillion yen, which included massive purchases of stock market ETFs, yet all these stimulus has barely exhibited any positive effects at all.
Instead the compounded effect of such policies have only propped up the banking system and Japan’s zombie companies. (Chart above from Danske Bank)
Japan’s massive fiscal expansion in the 90s to stimulate the economy from a bubble bust have only led to a sharp deterioration in her fiscal conditions; the opposite effect of policy goals.
Japan has accrued debt to the tune of more than 200% of her GDP! This makes her a prime candidate for a default (direct or indirectly through inflation) in the face of declining population, diminishing savings and deepening crony (zombie) capitalism, as well as, competition for capital with her equally debt laden Western peers (chart above from Zero Hedge).
And this is why Japan’s intensifying political and economic predicament may prompt for a rampant exodus of capital that may find shelter in ASEAN markets which may accelerate the latter’s boom bust cycle.
And yet all these landmark money printing has done so far has been to give the Nikkei, Japan's major equity bellwether, a petty boost of nearly 7% gains year-to-date gain so far.
But the costs of these temporary gains will be much larger in the fullness of time.
Yet, after all these string of failures, the proposed solution by the mainstream has been more of the same: to have more steroids—doing things over and over again and expecting different results. Incredible.
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