The Parallel Universe: Asian Edition

From Bloomberg:

Japanese and South Korean industrial output was less than estimates in March and Taiwan’s first-quarter growth was half the forecast pace as weakness in global demand limits recoveries in Asian economies.

In Japan, production climbed 0.2 percent from the previous month, the trade ministry said in Tokyo today. That was less than the median 0.4 percent forecast in a Bloomberg News survey of 27 economists. South Korea’s output fell 2.6 percent, a separate report showed. Taiwan’s gross domestic product rose 1.54 percent.

Today’s data add to signs of a cooling global economy after U.S. gross domestic product rose less than forecast in the first quarter and China reported an unexpected slowdown. While Japan is already rolling out unprecedented monetary easing, the latest numbers may fuel calls for South Korea’s central bank to cut interest rates.

The following charts should tell of the impact of the current direction of policies. 

All charts are from tradingeconomics.com and starts with reference point of the year 2008. The reason for this is to exhibit trends in Asia, or the relationship and developments between stock markets and industrial output emanating from the post-US crisis.

Taiwan’s Industrial production and Taiwan’s Stock Market have been headed in opposite directions.

Taiwan’s TWII has been marginally up by about 4% from Friday’s close year to date

South Korea shows of the same conspicuous divergences between stock markets and industrial production.

The Korea’s equity benchmark, the KOSPI has been marginally down by 2.63% as of Friday’s close year to date. Nevertheless the general trend has been up since 2008.

Japan’s stock market as seen from the Nikkei has been consolidating in 2009-2012.

"Abenomics" has recently spurred a stock market price blitzkrieg. The Nikkei 225 has been up by a stupendous 33.5% y-t-d as of Friday's close. 

Ironically, industrial production continues to wobble and has even worsened with the recent announcement of doubling of the nation’s monetary base.

Worshipers of Abenomics selectively focus on rising stocks, which they see as 'signs of progress'. Yet they ignore that the sputtering of the real economy seem to be accelerating in the face of Abenomics.

Rising stocks in Japan are really yield chasing boom-bust cycles from policy steroids, whose major beneficiaries are the politically privileged financial institutions.

Yet such grand reckless “doing the same things over and over again and expecting different results” experiment are bound to bring to the fore a crisis, perhaps sooner than later.

Meanwhile media wants to portray that the weakness in Developed Asian economies as requiring more support from central banks. They seem blinded to the recent developments.

They fail to see that all such cumulative easing policies signifies as one of the major causes of the decline in the real economy. Price instability or volatility from inflationism and various forms and degrees of interventions have only clouded economic calculations and thus has incented people to go yield chasing instead of investing in productive enterprises.

This is aside from the implied and direct central bank ‘PUT’ or "guarantees" on financial markets which has also meaningfully contributed to the public’s preference to speculate on financial markets than to invest in the real economy.

Such parallel universe dynamics are signs of bubbles or illusions caused by the massive distortions of the marketplace from growing political desperation as seen through the deepening of interventions. 

Nevertheless, rest assured that what is unsustainable, because they are founded on superficialities, won’t last. Worst, the longer this goes on, the greater the harm when imbalances, built up from such environments, unravels.