Japan: The End of an Era

I hate to say "I told you so!"... Well, no, that's not true. I LOVE saying, "I told you so!" Nearly four months ago, on December 29th, I predicted exactly what was going to happen with a weak yen. Now, this prediction has come to pass. Things are deteriorating quickly. I wrote in:

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?

Read more at: Here's Why A Weak Yen Will Destroy Japan 

Now, the numbers are coming in and they confirm what was (easily) predicted.

From: Testosterone Pit

Japan's trade deficit in February jumped to ¥777.5 billion. Exports dropped "unexpectedly" by 2.9% from prior year, despite Abenomics. Imports surged 11.9%. Eighth monthly deficit in a row, worst since 1979. Good news: exports to the US up 5.7%. But to China, they plunged 15.8%, to Hong Kong 14.3% (still iffy commercial relations due to island tiff). To the EU, they skidded 9.6% (tough economy). Not getting better: February 2012 had a surplus of ¥32.9 billion, after what was a record trade deficit in January of ¥1.4 trillion. This year in January, the trade deficit hit a new record of ¥1.63 trillion, and now ¥777 billion.    

Trade deficits aren’t the end of the world for Japan. But they’re the end of an era. Since the mid-1980s, Japan booked large annual trade surpluses, which helped fund budget deficits without having to rely on foreigners. But in 2011, there was a deficit of ¥2.56 trillion. A temporary blip, it was called. In 2012, ¥6.93 trillion ($78 billion). An all-time record. And so far this year, the trend is even worse. (Read more at Testosterone Pit)

And, Zerohedge adds:

Japanese Exports Drop More Than Expected Smashing Adj. Trade Balance To New Record Low 

It appears Abe and his henchmen had better stop doing things and say something as the huge devaluation of the JPY so far is NOT having the effect he had hoped for. Exports dropped 2.9% - more than expected - and while imports rose less than expected, the currency drop still meant an 11.9% surge in imports. All this means is that on a seasonally-adjusted basis, the Japanese Trade Balance just hit a new all-time record low (negative). USDJPY is strengthening on the news... it seems that well-placed non-news headline at 2am Japan time is well worth it now to cover this debacle... We assume the lesson is - just wait, "if we devalue, they will come."

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.