TW: Have mentioned about the only silver-lining (unless abide end of world notions) to this series of crises, if u r an American, is that just about everyone else is even more screwed. Japan is overlaying these crises with an even more insidious crisis, demographic collapse. Given the revulsion to immigrants they will likely bear its consequences without the hope and opportunity of integrating others into their society.
In the meantime their economy, the world's 2nd largest, contracted at an annualized rate of nearly 13% in Q4. Their debt situation is worse than ours and they, unlike us, have great infrastructure so investing there is not really useful, the yen is rising due to its gross undervaluation over the past decade plus, their interest rates are and have been essentially zero for over a decade. Oh and their political system is literally sclerotic dominated by geriatric politicians and parties.
From Business Week:
"...During Japan's lost decade of deflation in the 1990s, it could still count on the American appetite for Japanese goods to sustain the factories of Osaka and Tokyo. Now the slump in demand for Japanese autos and electronics has spread from the U.S. and Europe to China and other once fast-growing markets.
...Making matters worse is that the yen has soared as investors both domestic and foreign have sought the safety of an established currency and the security of a banking system relatively untouched by the subprime scourge. In 2008 the yen gained 20% against the dollar and even more against the euro and other currencies. Exporters, even after extensive cuts, need a yen rate of about 100 to the dollar to make money. Today the yen is at 94.
Can Japan right this mess? It should be able to—it has $1 trillion in foreign reserves, almost $16 trillion in household assets, and perhaps the most skilled workforce on the planet. But its options are surprisingly limited.
...At 173%, Japan's debt- to-GDP ratio is far higher than the U.S. level: Tokyo cannot afford a huge stimulus.
The second option is to slash interest rates. There's not much left to slash. The Bank of Japan pushed rates almost to zero to pull the country out of its last recession, then nudged them up as the recovery took off. As the economy has again slowed, Japan's base rates have fallen from a recent peak of 0.75% to 0.1%—not a lot to get companies and consumers spending.
The next option is to engineer a drop in the yen. One idea is that Japan use its reserves to help fund Washington's bailout and stimulus plans in return for a combined effort to reduce the yen. The U.S. has little to gain from such a deal, though.
The final option is to restructure the economy so it depends more on local consumption and far less on exports. Yet the Japanese, with memories of the lost decade still fresh and layoffs mounting once more, show no desire to open their wallets. In December, household spending fell 4.6%, the 10th consecutive monthly decline.
What's more, Japan's population is now shrinking. To boost consumption a nation needs young families: Japan does not have enough. There are now 10 million fewer Japanese age 20 or under than there were 30 years ago. The dearth of young adults and families is one reason car sales have dropped one-third from their peak in the 1990s. Many of these young people, squeezed by low-wage jobs, are saving far less than their parents did.
The needs of the old also make it hard for policymakers to cut taxes to spur spending. On Feb. 16, the day the government announced the grim economic data, Nippon Keidanren, Japan's biggest business lobby, called for a hike in the consumption tax to fund social security costs. Old, debt-ridden, and scared, Japan is in quite a fix."
http://www.businessweek.com/magazine/content/09_09/b4121020480652.htm?chan=magazine+channel_news
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