Why Japan's nightmare is worrying the world

Scotsman ^ | BILL JAMIESON

[DeaconBenjamin]

Expects rate cuts in US, UK, and EU.

[Gary Boldwater]

A decade ago there were predictions that the Japanese economy would take over the world. Remember Japan Inc?

At one time the most expensive real estate and cost of living in the world was in Japan.

Maybe Japan's deflation is a return to reality.

[oceanview]

real estate prices fell in the US after the tax reform act of 1986, I know plenty of people who sold at a loss. there was no depression. people don't buy and sell their homes at the drop of a hat when the value changes, they have a longer view.

wage deflation in the US concerns me more right now. alot of companies are cancelling salary increases for staff.

[DPB101]

Another reason why the entire Bush tax plan should have been passed. Japan shows how small, gradual attempts at stimulus fail.

[proxy_user]

The US differs from Japan in one important respect: in the US, if a company is bankrupt, it goes out of business. This may seem like a small matter, but it is amazingly effective at making our economy dynamic.

[jungleboy]

And Toyota just set RECORD PROFITS for the qtr just ended!

[ventana]

Can we compare roses to daisies? I am an economic idiot, but Japan is the size of what? New Jersey? Who can speak Japan and United States in the same forecasting breath? I will agree with this: Maybe Japan's deflation is a return to reality.

Meanwhile, if we want to stay competitive, we'd better let the education system quickly self destruct, or fix it. Love team Bush, but they are way oversold on Public Ed. V's wife.

[SamAdams76]

I sure do remember reading all those scare stories back in the 1980s about how Japan was going to become a bigger economic power than even the United States. In fact, the Japanese were buying up Rockefeller Center and huge cattle ranches in Montana. They were paying $150 a pound or something ridiculous to ship lobsters overnight from Maine. Even Tom Clancy saw fit to start writing about them once the Soviet threat began to diminish.

All those concerns seem kind of silly now. But that said, I wish Japan the best and I hope they recover from this economic malaise. They've been a damn good ally to us over the years. More so than Germany and France and even Canada, for that matter.

[RightWhale]

There might be a linkage between the gov't deficit, interest rates, and the real estate bubble.

The deficit will have to be covered by issuing bonds, the bonds will sell better with higher interest. With higher interest, real estate loans will be more expensive. More of the cost of real estate will be in interest, less on the principal. Real estate principal cost will have to be reduced or real estate purchases will be reduced, fewer customers. Those who pay cash will be pleased.

[arthurus]

America is right now looking at inflation, not deflation.The Fed is rapidly devaluing the dollar. That is inflation and must result in across the board price rises. Wages will be the last class of prices to increase.

The Fed is partially defaulting on the Federal debt by shoveling dollars into the economy so that the dollars that go to repay the debt are worth less than the dollars that were borrowed. That is the classic manner for governments determined to cheat their creditors.

Because the price of oil which affects directly most of the prices of goods in the world is coming down the inflation will not be noticeed for a while. Prices of oil affected goods will not soar with the inflation and the price of oil will not go down so far as it should given the increased supply and confidence. When the oil price hits bottom in a couple of months prices will commence that inflation rise, including the price of oil. If the arabs try to stem the leakage by switching to Euro pricing the general price rise will be soon and steep, at least until Europe retaliats by devaluing the Euro.

[oceanview]

but it isn't, show me where the devalued dollar is causing import prices on goods to rise? that economics 101 model worked for a while, but large companies now hedge against currency fluctuations. When the dollar was at .85 euro, BMW didn't lower their prices 20%, and they aren't raising them 20% now. Goods made in China have zero effect. So tell me, who is raising their prices on goods? No one.

[RichardW]

I thought that I had read that although sales were up, their profits had fallen by 2/3. Am I wrong?

[oceanview]

here is the article:

http://biz.yahoo.com/djus/030508/0337000609_1.html

[conway]

Japan has a socialist government. It was instituted by General McArthur and Harry Truman. Japan is 33 trillion in debt. Their creedo was full employment and full production after their defeat. It mattered not if there was a market for their goods.

Banks were forced to make loans to insolvent companies.

Socialism and Communism always fail but,there is no other system that allows criminals can ply their trade.

[eno_]

Wage deflation is very much here in high tech. I made a total of over $300k last year consulting to big telecom firms. I was one of the very last surviving highly paid consultants. I joined a startup this year for about a half the pay - assuming I hit all my bonus targets, but millions in potential upside. Since closing a VC round I'm, on paper, in the money for more than I made last year, but it will be two years before the company pays a cash salary+bonus above $150k.

And we get high priced litigators offering to read contracts for us for stock compensation. The high end labor market is still pretty slack.

[conway]

Japan has a socialist government. It was instituted by General McArthur and Harry Truman. Japan is 33 trillion in debt. Their creedo was full employment and full production after their defeat. It mattered not if there was a market for their goods.

Banks were forced to make loans to insolvent companies.

Socialism and Communism always fail but,there is no other system that allows criminals can ply their trade.

[Beck_isright]

Would not the rate cuts you expect be akin to chasing the wind?

[P.O.E.]

They tried (and succeeded) to do this to George HW Bush.

The press kept murmuring "recession, recession, recession" for about a year and a half, until people actually began believing it, cut back on economic activity, and created a recession.

How soon people forget, and how easily they are sucked into the mantra.

[oceanview]

well, there was a recession under Bush I caused by the runup and entry in Gulf War I, the oil price shock helped cause this, and his tax hike didn't help. But it was over in 2 quarters after the war ended, the economy was growing going into the election, but the media covered that up.

[snooker]

" ... Remember Japan Inc? "

Yep I remember it. It all started back in the 70s. Japan Inc. like all the other state run economies were going to rule the world. Effeciency, we don't need no stinking effeciency. Unemployment, we don't have none. We are going to divide up the market for everything, pool our resources and rule the world. And so it went, well at least for 10 years or so. Then something happened. They couldn't manage everything, imbalances showed up, no free market forces to compensate, TILT DOWN SHE WENT.

Another socialist pie in the sky bites the dust. So why do we care? We don't. Unless and until the Japanese government let's go of Japan's economy they will stay in this neverland limbo state. The problem is the government promise of paradise has jacked up prices far beyond reality in Japan. So something got to give.