Category Archives: japan

Japan and another way to think about it.

FT recently wrote an article about Japan.

 Many of Japan’s economic indicators have deteriorated since September, leading economists to predict that the nation has entered its fifth technical recession – two consecutive quarters of contraction – of the past 15 years.

My semi-liberal education has tainted me with the belief that most economic growth is a result of pollution, exploitation, and unaccounted inflation. I have also found it easier to break down economics by perceiving data such as GDP growth as a zero sum game. 

It is fair to say from 1950-1990 Japan did quite a bit of polluting and monetary expansion. Conversely, post 1990 to present Japan has reduced pollution and not been increasing money supply. Japan would be a fairly advanced system if their powers at be were able to control pollution and inflation simply by driving the yields down of their treasuries.

The idea is not far fetched if one were to think of examples on the converse. Ie.  high yield nations and their pollution levels…

 WOW! It’s WebStory!
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everyone is an expert on japan

http://www.ft.com/cms/s/0/3401f12e-c0f9-11df-99c4-00144feab49a.html

It may have been a victory lap of sorts. One day after the ruling Democratic Party of Japan leadership contest was resolved in prime minister Naoto Kan’s favour, the Japanese government intervened in the currency market to weaken the yen. While the move is a welcome escape from Tokyo’s policy paralysis, its significance is more political than economic.

Sureeee.  Then read this.

Foreign exchange interventions are more likely to stick if deployed in co-ordination with other countries and when they target speculative bets rather than fundamental market forces. As long as the Japanese allow chronically lower inflation than their trading partners, they must get used to irrepressible upward pressure on their nominal exchange rate. As fattening trade surpluses and historical comparisons show, the real exchange rate is hardly overvalued.

Doesn’t the author get it?  Currency rates can determine inflation, just as much as inflation can determine rates.  If Japan is successfully able to weaken their currency, then they will have inflation.

Ever since the Volker era, it has been much easier to control inflation through currency.   The raising of rates in the 80’s was simply that.  A currency intervention tactic.  No  coordination required.

Do people really think the world has coordinated the deflation that has occurred in japan?