Saturday, December 29, 2012

Here's Why A Weak Yen Will Destroy Japan

The clowns in the LDP think a weak yen will rescue Japan's faltering economy by making exports cheaper... Sounds good... That is, if there anyone to buy Japanese goods.

I fear that the weaker yen will be the last straw in breaking the Japanese Economy. Here's my reasoning why... 

China and Japan are in a row over islands. Boom! Down goes exports to Japan's biggest trading partner. Please refer to the NY Times article, "Japan Trade Suffers as China Ties Deteriorate":

"Shipments to China, which is Japan's biggest trading partner, tumbled 14.1 per cent as demand dropped for Japan-branded products..."

Also refer to Japanese Car Sales Plunge Amid China Rage.

Europe is in no condition to be big spenders on anything as Euro states are already in deep recession.

The USA isn't in good shape either as it is in recession too and Japanese cars aren't selling well due to Fukushima and other issues.

Gee? So what will a weak yen certainly buy for Japan? Answer: How about a 10% increase across the board on energy imports?

From Forbes Magazines, please refer to: Japan's Energy Dependence 

Data from the Energy Data and Modeling Center (EDMC), Institute of Energy Economics, Japan, for 2008 published in the APEC Energy Overview (2010), paint a stark picture of Japan’s energy vulnerability: 

– Of total primary energy supply (508,327 kiloton of oil equivalent (ktoe)), 85 percent (433,725 ktoe) was imported.  The breakdown of primary energy was coal 23 percent, oil 44 percent, gas 17 percent, and other 17 percent.  

–For final energy consumption in ktoe, the industrial sector took 45 percent; the transport sector 24 percent; and other sectors 31 percent.  By type of energy:  coal 11 percent, oil 53 percent, gas 9 percent, and electricity and other 28 percent.  

Don't forget that these are 2008 figures - three years before the Fukushima Dai-ichi nuclear disaster. Things have gotten much worse since then. Now take all that imported oil and natural gas (and coal) and jack up the price 10%... What do you get?

Couple that sum with the 2% inflation rate targeted by the new government of Shinzo Abe and you get a collapse of the Japanese economy.

2013 is not going to be pretty for the Japanese economy.


Anonymous said...

Japanese voters returned to the LDP, so (shurg). Exports are 13% of GDP. Europe is only 10% of that and its ability to buy is a question mark. Thailand has Japanese factories that are in the Japanese supply chain but are temporarily shut from flooding. Japanese electricity production is also limited because of the 53 nuclear plants that are increasingly closed because of inspections.
As Mike points out in previous articles, I think its Japan's government debt to GDP that really matters (like the US). Japan is much stronger than the US as the US has strong personal debt. The US fiscal cliff (budget control act of 2011) will insure 2013 to be interesting times. Chinese politicians/nationalists stirring up the island row is hard to avoid, and will eventually blow over.

Anonymous said...

The US fiscal cliff seems like a distraction.

And... Why wouldn't the boj just bailout the energy bills like the fed did the too-big-to-fails?

Hat Trick's Jim Willie recently wrote about an asian economic grouping/meeting? which excluded the unitedstate.

Some say that'll be a decision maker/action to isolate the us dollar.

This blogs take is kind of counter to that line of thinking.

Also, with the game Hot Potato in mind, couldn't the fed and co. just hand out cash for imports?

To paraphrase LvM: "... no means of avoiding the bust,... just prolonging it."

A prolonging they shall go.

A prolonging they shall go.

- IndividualAudienceMember

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