Unsexy economics and impotent politics

In these days, the finance world is dealing with Japan. You think it is too far? Well, not really... It is nearer than you might believe.

That is a pretty desperate economy today. The country is desperate from that too and as a matter of fact people are desperate as well. Japanese society is mentally unhealthy and slowly dying out. Attention! That is not just some idle talk. That is simple demography.

According to the demographic study of Japanese government which was published today, almost 45% of Japanese women, who are living alone and fit the range 18 to 34 year, are still virgins. Men in the same age range are not doing much better. Even worse – they don’t even want sex, relationship, and love: More than 30% of men and 26 % of women really stated that they don’t want a relationship at the time. Except this unusual demographic situation is understandably translating to macroeconomic numbers. There is no demand for Japanese goods. It is not … sexy. Chinese or Korean person will make the same goods and cheaper.

Japanese exports have been dropping for 11 months in a row now. The number for August released today is mentioning 9.6 % drop of export year on year. Cars registered a significant drop. (I understand. I used to have a Japanese car once upon a time. It was amazing, safe but boring and without spirit or temper.) Japanese exports to the USA dropped 14.5 % and the exports to China 8.9 %. Japanese trade balance ended up with a deficit. That Japan, which lives decades from the export of technologically difficult consumer’s goods is suddenly not able to export. That is a giant problem. Because it is still a global economy with global influence.

Japan’s central bank understood that its current currency politics is not working. That’s why it announced that it is going stop targeting the amount of money at economy but will target it at the bond’s revenues. To translate it to human speech: Japan’s central bank lowered the bonds’ revenues so much that not even long-term bonds are profitable now. That is a problem for the pension funds – they are not generating profit. The pensioners won’t have anything to live from!

The central bank wants to in other words steepen the profit curve. Short-term bonds will be with low or negative revenues and long-term bonds with high. In that way, funds would have something to invest in and the banks would heal. Next to that the problem of central bank basically not having stuff to buy anymore would solve as well. The buyout of bonds will continue but in a smaller scale. The market is hoping for relief of the financial sector and that’s why the stock markets are growing today. I think it sounds like ‘when it rains it pours’. Nothing will get solved.

The monetary politics is simply impotent. Not only in Japan. Even in the Eurozone. This small change won’t help the growth. The retreat of Japanese and entrance of other Asian goods will be continuing here...