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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (3860)	12/25/2001 12:53:03 PM
From: ahhaha	Read Replies (1) \| Respond to of 24758

Flagging Japan economy spurs weaker yen debate By Yonggi Kang TOKYO, Dec 25 (Reuters) - Japanese officials fanned speculation on Tuesday that the only way out of recession may be a weaker yen, despite some opposition from within the government, helping pummel the yen to new three-year lows against the dollar. The comments came a day after Prime Minister Junichiro Koizumi's cabinet approved a belt-tightening budget for the next fiscal year that analysts say is not enough to hoist the world's second largest economy out of recession. With fiscal stimulus options limited by a bulging public debt -- already the worst among industrial countries -- and interest rates already near zero, a weaker yen would be a convenient way out as it increases Japan Inc's export competitiveness and can help cushion a persistent decline in domestic prices. Finance Minister Masajuro Shiokawa signalled he would condone a further decline in the yen, saying it would still keep the currency in line with Japan's economic fundamentals. ``Even if the yen weakens slightly further, it would still be an appropriate assessment of Japan,'' he told a news conference. There is no greater economic stupidity than to think your economy will benefit by a weakening of your currency. Shiokawa added that a weak yen would be beneficial for Japan by correcting a stubborn fall in prices. Japan's consumer prices have fallen for an unprecedented two straight years. Why correct a gradual decrease in consumer prices? Why is that bad? Are incomes falling faster than prices? No. Japan should be experiencing the evident conditions, because they're still more efficient than any economy in the world. They should be piling up foreign currency, and that's exactly what's happening. How is that bad? His deputy, Haruhiko Kuroda, echoed that sentiment, saying the yen's current weakness reflected fundamentals, although a slide beyond that level would be undesirable. The yen reflects Japan's obsession with neo-mercantilism. To reverse the slide in the yen is easy. The BOJ only needs to raise interest rates. What would accomplish the same thing is the creation of currency. Short rates would then rise and the yen would stabilize. Incidentally, such a short rate increase would force banks to move more aggressively towards resolving the so-called "banking crisis" which isn't a crisis and has infinitesimal consequences since the quantity of money associated with bad loans, say $1 trillion, is peanuts. It represents 2% of assets. In two years the entire amount could be eliminated using foreign currencies piling up daily which are basically useless to Japan given their obsession with neo-mercantilism. The dollar continued its recent ascent, breaking through the key 130 yen level to ground not seen since October 1998, taking its cue from those comments, particularly Shiokawa's. Traders said thin market conditions due to Christmas exaggerated the dollar's move. Some officials were careful to stress that the government was not intentionally trying to weaken the yen, as it could trigger complaints from other Asian nations. But above Shiokawa said an intentional weakening was consistent with Japanese fundamentals. This kind of contradiction indicates that there are two books, two official policies going on in Japan. There is the real one and then there is the one that any set of pols expresses to the world in order to appear responsible. Pure hypocrisy. China's official People's Daily said in a commentary on Monday that Japan's weak yen could set off a round of Asian currency devaluations not seen since the regional economic crisis of 1997. Asked about such concerns among Asian neighbours, Trade Minister Takeo Hiranuma said: ``If the yen weakened further, it is possible that such issues would be raised.'' ``I think it is desirable that the yen does not fall further, although given current severe economic conditions the recent trend is likely to continue.'' Severe economic conditions? They believe their own hyperbolic disinformation. Hiranuma also cautioned that a weaker yen would discourage inward foreign investment, while Toyota Motor Corp president Fujio Cho said his firm -- Japan's largest car exporter -- was not necessarily happy with the yen's weakness due to its effect on share prices and higher procurement costs. It is for this reason that the neo-mercantilist egomaniac tin-plated empire must end. It doesn't matter what little boys like Shiokawa think they will do; it does matter what companies like Toyota must do. Either the government will renounce neo-mercantilism and put pressure on the BOJ to engage a tighter monetary policy by INCREASING the quantity of money, or companies like Toyota will raise prices to cover costs. In either case the yen will reverse its slide. If Toyota raised prices, would that stimulate Detroit's output due to competitive position improvement? It would stimulate Detroit mostly to raise prices in parity. AUSTERE BUDGET Over the past decade, the Japanese government has tried to spend its way out of recession through public works spendings funded by bond issuance. But Koizumi has pledged to rein in public debt -- projected to rise to about 140 percent of gross domestic product -- despite objections by many economists and politicians within his own Liberal Democratic Party. This sounds like the Democrat's solution for the US. On Monday, his cabinet approved a budget draft for fiscal 2002/03 totalling 81.23 trillion yen ($621.4 billion), down 1.7 percent from this year's initial budget. Discretionary spending -- the core portion for policy-related spending -- is set to fall for the first time in four years to 47.55 trillion yen, down 2.3 percent from the initial budget in fiscal 2001/02. Economics Minister Heizo Takenaka said he did not think the government's budget draft for fiscal 2002/03 represented fiscal austerity. ``If you consider the decline in prices, it's virtually unchanged. We do not think it represents austerity and is probably net neutral for the economy,'' Takenaka told a news conference. The government expects the economy to post zero growth in the next fiscal year, partly helped by a second supplementary budget for this year which is aimed at boosting demand. If it didn't work before, it must work now. If ever there was a mistaken policy it is this attempt by government to create final demand stimulus. 99% of professors think that is the right way. They're all brainwashed by the theory of demand management even though such artificial stimulus never works and always exacerbates problems. When stimulus burns out, what then? You have to create the means for self-perpetuating stimulus. Those means never come from government. Projects in the second extra budget -- with government outlays of 2.5 trillion yen -- are mostly expected to be implemented next year. But with the economy projected to contract 1.0 percent in the current fiscal year, politicians are already calling for more spending. Japan has no problems, but Japan is doing everything it can to create problems. They are entering into engineered disaster and we will be following them in due time, because socialism still dominates the US, the last bastion of a false 19th century theory of pseudo economics exclusively promoted by brilliant minds in universities.