Aaron, I have been complaining about Japanunwillingness to recognize their banking problems for more than a year now. Many people blame the SEA problems on Korea, Malaysia Tailand and Indonesia and their over agrressive central planning (in some cases) and corruption in others, but I think that the straw that broke that Camel back is Japan and its slow economy in the last few year. The Japanese economy is in a straight jacket, from one side they have increased taxes (now they are trying mildly to reverse some of this), and their banking system is such that lending activity has halted to a crawl. Japan increased demand was supposed to help asorb the overcapacity build up in SEA, but that did not come, and the house of cards crumbled. Now Japan itself will suffer since a good chunk of their export (about 30% maybe 40%) is going to that part of the world, and Japan depends much more on export than we do.
The LDP can still come to the rescue and do two things, write down the bad debts on the bank's books, the sooner the better, so that this money (which is tied up in unperforming loans) can be released into the economy and stimulate growth, and second implement a solid $20 to $40 billion tax cuts (for at least a year, then they can slowly and gradually reimpose some of these). The low interest rates in Japan cannot be lowered more, what is required is for banks to loan again and for consumer to have money in their pockets to spend.
Will they do this, as Jess says, eventually, but it might be too late. The last chapter in SEA crisis has not been written yet, and unless the LDP acts and acts fast, the spiral may bring down Japan with the rest of the rim. If that happens, we in the US will also be in a little trouble, but far less than Japan and the rim, IMHO.
Zeev
Zeev |
