So how much impact would Japan pulling $2.5 trillion out of a $10 Trillion economy actually have, especially when Japan is so dependent upon export to sustain their economy.
Listen, 1 in 4 Japanese(25%) are looking to retire within 5-10 years. They don't like foreign laborers into the country, and certainly seem unwilling to encourage them to become Japanese citizens. They are facing paying off a national debt equal to 130% of ther GDP, while 25% of their population are retired and spending their savings and not paying income taxes.
On the other hand, here we have the US, with our national public debt representing 37% of our annual GDP, and the ability to import labor, and assimilate them into our society while our baby boomers retire, thus maintaining our tax base.
So the question for Japanese bankers/investors.. is just what kind of cultural and political changes are they prepared to make to stimulate growth in their economy. Japanese society has historically been homogenous and even Xenophobic. So it's tough to spur economic growth.
Their SS system has been increasingly dependent upon personal savings and pensions and any devaluation of the Yen is going to screw over these retirees and any purchasing power they would have. Of course, if a devaluation is too small, then they will adjust by saving 10% more, thus increasing deflationary effects as they buy even less.
Unfortunately the move must be major and economically painful to savers, if Japan is going to be shocked out of its economic malaise. And I wonder how much financial pain the Japanese people will take until they realize they have to put those savings at risk again in investments and higher interest bearing instruments that don't currently exist in Japan.
So the question is, would the Japanese savers be more willing to convert Yen to dollars, or to gold.
Regards,
Ron |
