Happy Thanksgiving! Sony and Panasonic are Junk! Japan Has No Leadership! Mish Shedlock Spells it Out!

Happy Thanksgiving! May the rest of this year see you and yours healthy and prosperous!

My son and daughter along with two friends (Ko & Takashi) visiting us for turkey in 2010

Yesterday, I posted about how messed up the Japanese economy was in "Japan is Collapsing." The response to that article was amazing. Thank you... Too bad the article contents are true.

Interestingly, just two nights ago I had dinner with some high ranking executives from Germany's biggest television network. They were in Japan on a fact-finding mission and had visited several Japanese corporations who told them all sorts of nonsense stories (spin) about Japan.

The most ridiculous one was given to them by a spokesman from either Nissan or Docomo (they couldn't recall which company told them - Jet lag and all). The spokesman told them something along the lines of, 

"The Japanese work so hard because of their samurai ancestors."

I was asked by several of the visiting German delegation if this statement was true. I told them it was "...total and complete bullsh*t!"

Actually, I've heard this "samurai ancestors" romanticist nonsense before. It's not true at all. Folks, there might be only a handful of people in Japan who have "samurai ancestors." 95% of all Japanese have peasant-class ancestors and the other 5% or so have merchant class ancestory. The samurai were low-class paid killers and "worked" (if you call it that) for money killing people or being body guards. Their only dedication, generally speaking, was to whoever paid them the most. 

That certainly doesn't translate into long and hard hours sitting at a desk all through the 50s, 60s, 70s and 80s that most Japanese dedicated during the so-called Japanese economic miracle.

And a big reason that Japan is messed up today is that she doesn't have the people with the leadership qualities like she used to and her people don't work hard and dedicate the long hours like they used to. For more on that subject please refer to: Why Korea Beats Japan:

"...the biggest problem for Japanese companies versus Korean companies in manufacturing may not be simply issues with design and ease of use, but it has a lot to do with corporate culture in Japan.

Frankly speaking, from what I've seen, Korean companies will continue to beat Japanese companies for the long foreseeable future. There's no way out. Why? Because inside a Korean company, there are no factions fighting for position like what goes on at a Japanese company. Also, Japan doesn't have the leadership it once had; there are no more good leaders, definitely in politics and there is a terrible shortage in business in Japan too.

My Samsung friend put it this way, 

"At a Korean company everyone is on the same bus and we are all going the same way. At a Japanese company, the leaders have a very difficult time getting everyone pointed in the same direction."

He's absolutely right. 

At a Japanese company groups are struggling within, and against each other, to gain power. At Korean companies, I think they feel it is "Korea versus the world!"

When I worked as an executive at a major Japanese TV station subsidiary, I saw a consistent in-fighting between three or four factions for power. When faction "A" would come to power, the other factions seemed to not put in their best effort. In fact, I saw times when the other factions would actually drag their feet and become a hindrance to the efforts of the group in power.

It was infuriating to me as a foreigner who wasn't inside of any group to see people protecting their friends and their position as the number one work priority rather than the success of the company business or the project. 

It seems to me that the success of the project would automatically protect one's position. But no! These folks wanted success for sure, but only if their group was the one in power when that success occurred.

I saw this same problem at a Sony subsidiary, another TV network I worked at in the mid 80s ~ early 90s; and you can readily see this same problem in Japanese politics anytime anywhere.

I was, and am still to this day, astounded at the immaturity of some of these people." 

I wrote that article at the end of September. It's been only two months but I only see things getting worse.

Also the other night, the COO of the German television network told me that he still thought Sony was a great corporation. I told him,

"You do know that Sony lost a billion dollars last year?"

He said nothing and drank his wine. Sorry to burst his balloon.

That was a few nights ago.... 

This morning I wake up and the first thing I see is an article that the ratings agency of Fitch has cut Sony and Panasonic's stock ratings to "Junk" (what timing, eh?): 

The agency slapped a speculative rating on each firm, pointing to their weak balance sheets and declining position in the global electronics sector.

Fitch said it cut Panasonic by two notches to BB, while it slashed Sony's rating by three notches to BB-, with both firms given a negative outlook.

"The downgrade reflects Panasonic's weakened competitiveness in its core businesses, particularly in TVs and panels, as well as weak cash generation from operations," Fitch said in a statement.

"It also reflects the agency's view that the company's financial profile is not likely to show a material improvement in the short to medium term."

Fitch also cast doubt on Sony's prospects, saying a "meaningful recovery will be slow, given the company's loss of technology leadership in key products, high competition, weak economic conditions in developed markets and the strong yen".

Panasonic was also downgraded to one level above junk by Moody's earlier this week.

I just wonder what took them so long to downgrade these companies... All they had to do was to go and check out and talk and work with the people I do and they'd have known 5 years ago that Sony was headed for the trash-can. Heck, when Sony unveiled their MP3 player that was to compete with the iPod years ago and called it the "Walkman" you knew they were out of good leadership and good ideas. 

Look for Sony to be emblematic of the rise and fall of Japan's economic miracle.

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This morning, I also received a mail from my good friend Mish Shedlock and he wrote that I could reprint his entire blog post about Japan (that I referred to yesterday) in full and I wish to do so here. Mish has the most wonderful insights and I find his blog to be a "Must Read" everyday. I think you should too!

Doorsteps of a Currency Crisis; Economic Illiterates Debate Monetary Policy; Monetarist Mush 

Japan's grand experiment of decades-long QE coupled with Keynesian foolishness is about to take one last gigantic leap forward before it plunges straight off the cliff into a massive currency crisis.

Please consider the New York Times article A Call for Japan to Take Bolder Monetary Action 

 For years, proponents of aggressive monetary policy have offered this unusual piece of advice as a way to end Japan’s deflationary slump and invigorate the economy. Print lots of money, they said. Keep interest rates at zero. Convince the market that Japan will allow inflation for a while.

Japan’s central bankers long scoffed at such recklessness, which they feared would ignite runaway inflation. But now, the bank’s hand could be forced by an unlikely alliance of economists and lawmakers who have argued for Japan to take more monetary action after more than a decade of weak growth and depressed prices.

Championing their cause is the former prime minister Shinzo Abe, who is favored to return to the top job after nationwide elections next month. Otherwise deeply conservative, Mr. Abe surprised even his own supporters by calling for the Bank of Japan to be much bolder in tackling deflation, the damaging fall in prices, profits and wages that has choked Japan’s economy for 15 years.

In escalating remarks over the last week, Mr. Abe has said that he will press the Bank of Japan to act on government orders if his Liberal Democratic Party wins the Dec. 16 election and even rewrite Japanese law to reduce the bank’s independence.

In a speech in Tokyo on Thursday, Mr. Abe said he would call for the Bank of Japan to set an inflation target of 2 to 3 percent, far above its current goal of about 1 percent, with an explicit commitment to “unlimited monetary easing” — an open-endedness that has caused jitters among some economists. The bank’s benchmark interest rate should be brought back to zero percent from 0.1 percent, Mr. Abe added.

He went even further over the weekend, saying in the southern city of Kumamoto that he would consider having the bank buy construction bonds directly from the government to finance public works and force money into the economy, according to local news reports. That raises concerns, however, the bank may be called on to bankroll unrestrained spending on more roads and bridges that Japan does not need.

Economists cite several missteps by the central bank that have entrenched Japan’s deflationary mind-set and made consumers and businesses wary that the bank’s policies will stick. In early 1999, as the country’s economic woes deepened, the bank lowered a benchmark interest rate to virtually zero and said it would keep rates at zero until deflationary concerns disappeared. But an economic uptick in mid-2000 caused the bank to raise that rate to 0.25 percent despite protests from the government that the move was premature.

Monetarist Mush

Anyone who thinks an interest rate hike from 0% to .1% or even .25% has much influence on economic growth has "monetarist mush" for brains. Seriously.

The NYT does not name the economists, but I have no doubt they exist. Highly respected (for no reason) Richard Koo is one of them.

I have written about Koo on numerous occasions. From Japan's decade long experiment resulting in public debt of a 1,000,000,000,000,000 yen (a quadrillion yen), Koo reckons Japan failed to defeat deflation because it did not do enough!

Japan is in a crisis alright, and it was entirely self-made, by politicians listening to clueless economists all begging Japan to do something.

One Thing Worse 

Central banks are bad enough on their own, but history shows that one thing worse than central banks acting on their own is central banks acting under control of politicians.

 Committing to a little inflation will push stock prices higher, while a weaker yen will bolster Japan’s exporters and strengthen corporate balance sheets. Incomes will rise, fueling consumption and raising tax revenue for the government, said Kozo Yamamoto, a lawmaker of Mr. Abe’s Liberal Democratic Party.

“Basically, it’s what the Bank of Japan should have been doing for the past 15 years,” he said. “A few percent of inflation is nothing to be worried about.”

US Populist Position

It's not just Japan loaded up with populist fools. The US has its share of them as well.

For example, Ellen Brown wants to end the Fed and put California politicians (state politicians in general) in charge of printing money to support "growth" as well as union causes.

As I have said, the one thing worse than having a Fed in charge of monetary policy is having politicians in charge of monetary printing!

For a discussion and an absurd video by Ellen Brown, please see Lawmakers Threaten to Take Over Monetary Policy

Economic Nonsense Regarding Inflation, Consumption, Wages

Kozo Yamamoto preaches widely believed economic nonsense.

Inflation will not raise consumption. People do not stop buying things just because prices are falling. Computers are proof enough. Prices of computers and electronic goods have been falling for decades, yet every year the volume of merchandise sold reaches skyward.

History suggests people buy things when they need to or want to not just because prices are rising. Government interference and tax breaks can shift demand forward by a few months (for no real economic benefit of course). There is only so much room to store things.

How much food or clothing can you store? Will you buy a coat you do not need, just because prices are going up?

US QE Example

Take a look at the US.

QE has put a floor (for now) on asset prices but it has not done a damn thing for wages.

I discussed this at length with Lauren Lyster on Capital Account on November 3: Mish on Capital Account: Jobs, Real Wages, Income Distribution, Fiscal Stimulus

I come in at about the 3:00 mark, but the first few minutes of Lauren are entertaining as usual.

Average Hourly Earnings vs. CPI 

Average hourly earnings has been falling for years and lagging CPI inflation since September 2009. Simply put real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly.

If inflation and QE forces wages and hiring up, then why didn't it?

The fear for Japan should be rising interest rates not deflation. If interest rates rise a mere 2%, interest on the national debt will consume 100% of government revenues.

When that happens a currency crisis awaits. I have long stated a currency crisis would happen far sooner in Japan than the US, and I believe we are about to find that out soon enough.

Mike "Mish" Shedlock

http://globaleconomicanalysis.blogspot.com 


Read more at Mish's Global Economic Trend Analysis: http://globaleconomicanalysis.blogspot.jp/2012/11/doorsteps-of-currency-crisis-economic.html

Cut Spending? Could the Japanese Government Finally Be Waking Up?

The Telegraph has an article out today entitled, "At Last, Japan May Be About to Abandon its Disastrous Keynesian Consensus." 

Here is a snippet:

....“The government running out of money is not a story made up. It's a real threat," said Japan’s finance minister Jun Azumi on Friday. Opposition parties in Japan are blocking a deficit financing bill which would allow the government to continue to drive its debt levels above 200pc of GDP. If the opposition holds firm, the government has threatened the unthinkable – it will spend less. Tax rises are also on the table, although the doubling of sales tax to 10pc will not come fully into force until 2015.

This is a turnaround for Japan. The nation’s government has already contorted itself in all the ways now common in the West while attempting to postpone this day..... "

I've been screaming since I can remember that the laws of basic math say that if you have 5, you cannot keep spending 7 and that Japan's debt problems must first be fixed by a cut in spending. Coud it be that people are finally waking up?

....Well, we are talking about the government so don't hold your breath.... 

The Japanese Titanic: Japan's Public Debt Will Surpass ¥1 Quadrillion Yen Any Day Now

How much is a quadrillion? That's a thousand trillion....


Recently, I've been getting my daily money market news fix from the usual suspects: Mish Shedlock, Karl Denninger and Mad Max Keiser but there's another blog that I've found that hits the mark consistently and updates more than several times a day. It's called Zerohedge. I highly recommend it because the guy that runs it seems to get the scoops on what's going on days and even weeks faster than all the rest.

The latest one rings the alarm bells for Japan once again. Japan's Public Debt is about to surpass ¥1 Quadrillion any day now. Jeez! How many zeroes are there in a quadrillion? I didn't even know without having to look it up.


Let's see that's a one with fifteen zeroes after it. Like this: 1,000,000,000,000,000.


Zero hedge reports in Japan Will Raise More Cash From Debt Issuance Than Taxes For Forth Year in a Row


Japan's marketable public debt, already the largest in the world at $11.2 trillion compared to America's $10 trillion (of course this assumes the whole SSN sleight of hand is funded, which it isn't), is due to surpass ¥1 quadrillion any month now (aka the exponential phase). And that's just the beginning. As Bloomberg reports, "Bond sales to the market will climb to a record 149.7 trillion yen ($1.9 trillion), while the national budget’s reliance on debt for funding will rise to an unprecedented 49 percent in the year starting April 1, Japan’s government said Dec. 24.


The article goes on to stomp on these Keynesian "economists" (read: clowns) who claim that the government should increase spending to pick up on falling consumer spending and loosen monetary restraints (read: print like hell) in order to pump up the economy before a recovery starts:


In other news, and to all the neo-Keynesians out there, we post the following thought experiment: according to the head priest economic growth derives from debt issuance. And since apparently every country (yes, yes, that has its own currency) can issue infinite amounts of debt, why doesn't the US and Japan (and the EU post Eurobonds), simply announce it will monetize, aka print, an infinite amount of debt tomorrow? Shouldn't that lead to global GDP promptly rising by infinity %? Or is there an actual problem with this hypothetical scenario which takes current debt trends to their ludicrous extreme.


Want to see what a quadrillion pennies look like? Here ya go!

Here we have buildings (in front) used for scale at a trillion. They're now dwarfed by the large cube of pennies in back (quadrillion). The large cube is a quadrillion, or a thousand times one trillion. This cube is roughly a half-mile wide and would weigh an astonishing three billion tons.

Translation: Japan is doomed. 2012 and beyond are going to be rough ones.


Happy New Year! If you are in Japan, may I suggest drinking as much as you can, while you can. 

Japan's Insane Tax-At-All-Costs Political Class

This will be my 800th posting on this blog. I think it is fitting that, after all that has happened, as through the short history of this blog, the economy of Japan and most western nations are close to collapse, as Japan's national debt is over 200% of GDP, as the US government has surpassed the legal limit on the debt ceiling for that nation and into de facto bankruptcy, as silver hits a new 31 year high to nearly $44 USD an ounce and gold is knocking at the door of $1500 dollars an ounce, that this 800th blog should be about taxes and the economy.

BEATLES CARTOON - TAXMAN

Once again, the news shows that our rulers never learn their lessons when it comes to taxation and debt. After the disastrous events of the last month starting on March 11th and continuing today, once again, the government of this country shows that their only answer to our financial problems is to raise taxes.

Jiji Press reports:

Tokyo, April 18 (Jiji Press)--Japan is considering raising the consumption tax by 3 percentage points for a limited period of some three years to secure funds to rebuild areas devastated by the March 11 earthquake and tsunami, officials said Monday.

   Japan will be able to secure 7.5 trillion in annual tax revenue by raising the tax rate to 8 pct from 5 pct, government and Democratic Party of Japan officials said.

   The nation is preparing the first supplementary budget for fiscal 2011 with the spending amount of some 4 trillion yen. The budget will be covered without new debt issuance.

   Tokyo is likely to compile more budgets for the current year, as many in the government and the ruling party believe that more than 10 trillion yen should be spent in total on the reconstruction of the disaster-devastated areas.

   To finance the second and later budgets, the government will issue reconstruction bonds. Many think that the revenue from the envisioned tax hike should be used entirely to redeem the reconstruction bonds, the officials said.

It says in the first paragraph, "Japan is considering raising the consumption tax by 3 percentage points for a limited period of some three years..." Sure. Only three years, right? And after that, we're supposed to believe that the Japanese government will have their financial house in such good order and fine shape that they can cut taxes? What planet are these people living on? Has the Japanese government ever cut taxes? How, pray tell, are they supposed to be able to do that when the economy is so bad and, as I mentioned, our public debt has surpassed 200% of GDP?

History also shows us what happens when sales taxes are raised. There will be a correlating drop in sales equal to the percentage of the sales tax; raise taxes by three percent and sales will drop by three percent. And who winds up paying for this kind of sales tax hike? Not the ultra-rich or corporations who have all sorts built-in tax advantages. The rich only have to spend a few percentage points of their income for basic foodstuffs. The average middle class household is spending 15~25% or more just for survival. Hit them with a sales tax increase and you hit them below the belt. 

The good example goes like this: Say, average millionaire wants to buy a new yacht? No problem. It's needed to entertain guest so it is a business and tax write-off. But, say, the single mother with a two kids whose husband has run off and doesn't pay any alimony, is not buying yachts and diamond necklaces, she is scrimping and saving to buy milk, eggs and rice. and the basics she needs to survive.

A 3% hike in her grocery bill hits hard. 

The average household is is also expected to carry the burden of massive public debt created by the government. It is this government who arbitrarily decides to tax one class of poor people to give to another class of poor people (in this case, the average Japanese family gets taxed to pay for the suffering and reconstruction of the poor who suffered in the Tohoku disaster) all the while the government takes a margin for delivering these services and gives no-bid reconstruction contracts to their cronies.

Nikkei 225 at ¥9441 on April 19, 2011

The economy is already in desperate shape. Japan's credit rating has been downgraded in the last year and the Nikkei 225 is wheezing away at under 9,500 (it is at 1/4 the amount it was at the height of the bubble economy) and it has also been reported that 15.7% of Japan's population now live below the poverty level. Think about that. 

And, with all of that, with all of this suffering and misery caused by badly thought out government policies, these people want to raise taxes? They must be completely insane.


Japan owns trillions of dollars in US government bonds that were bought with tax monies taken from the public. The value of these bonds have lost some 40% over these last 10 years due to the rapid decline of the US dollar, yet, even with this, the Japanese government has painted Japan into a corner whereby we cannot unload this debt without causing a quick rise in the yen and hurting Japan's export economy.

Silver & gold price explosion is flashing warning signs about the economy

Gold breaks new record to $1503 the day of the posting of this article

Not only that, at least twice in the last 365 days, Japan (and most recently foreign central banks) has intervened in the dollar x yen rate and flushed billion of yen (billions of US dollars) in foolish attempts (that haven't worked) in order to lower the value of then yen.


The fact of the matter is that, for reconstruction, as Peter Schiff points out, Japan should want a stronger yen as that would make our buying of oil and raw materials as well as other items needed to rebuild the ravaged areas cheaper.


But, no! As usual, when it comes to doing something about the economy, the government cannot admit its errors and try to strip them away. As is the case now, and has always been the case, the government of Japan's answer to financial problems is not to cut spending or to sell poorly valued and foolishly bought US government backed securities (that lose value every day), but the answer is, and always will be to spend and raise taxes.


That is why our economy has been so messed up for this last 20 years and that's why is is so easily predictable that our economy will be messed up for at least the next decade or more as Mish Shedlock so skillfully points out.


The politicians who live on dead and proven failure Keynesian economic policies are leading this country down the road to ruin. It will be soon enough, at this rate, that Japan will be like the Philippines. Throw this situation in with how the youth of this country have no where near the dedicated and hard work ethics of their fathers and grandfathers and you have a chemistry that spells out for a very grim economic future indeed


When we look back at what happened in twenty years from now, we'll not be surprised for a second that Japan will be jokingly referred to as the Northern Philippine archipelago. 

Marketing Japan: Japan's Financial Disaster Coming Soon

This blog is about Marketing for Japan and also about interesting tidbits about Japan for your enjoyment. Now, I don't usually blog about so much financial information and news as such, but something has just come across my desk that I just cannot stay silent about.

From this morning's Japan Times:

National debt hits 190% of GDP at ¥900 trillion

The outstanding balance of the central government's debt reached a record high ¥904.08 trillion at the end of June amid massive bond issuances and declining tax revenue, Finance Ministry data showed Tuesday. It is the first time the debt balance, including government bonds and financing bills, has topped ¥900 trillion. Per capita debt came to around ¥7.10 million based on Japan's estimated population of about 127.42 million as of July 1. 

This is just total and complete insanity by the government. Of course, anyone who can read between the lines can see how this does effect every aspect of life in Japan including future works and economic aspects as well as how this will effect marketing in this country and life in general.

That ¥7.10 million per capita debt comes out to around $83, 172 (USD) per man, woman, and child owed in red ink the country of Japan. That means that if every single man, woman and child paid $83,172 dollars right now, we'd pay off our national debt - but be back into immediate debt by tomorrow due to interest on that debt! This is crazy. 

Now, on top of that, the Keynesian idiots in the government want to raise consumption taxes (sales tax) from 5% to 10%!? Morons.


There is no way out of this mess that the government has gotten us into except to either declare bankruptcy or repudiate debt. But you won't hear anyone talk about the 800-pound gorilla in the room. Things are bad enough now with 15.7% of the Japanese public below the poverty line. What is there that can be done? Raising taxes!? We are already taxed to death! The people have been squeezed and can be squeezed no more!

Of course, we never hear any ideas from the government about shutting down unwanted "services" like massive government run organizations that are basically a social jobs network for retired government workers (like meter maids). 


How about we start by slashing government employees pay and staff by 50% and ending all overseas "self-defense" missions and war-games training today?

The end of this financial mess is coming soon enough. No country in the history of mankind has ever survived this sort of Fiat money expansion that the Japanese government is currently involved in... 

The Romans couldn't do it. The Germans couldn't do it. Japan hasn't been able to do it over these last 20 years (the USA certainly is trying but will fail too)...

The only option for you, dear reader, is to get out of debt ASAP and protect your investments with commodities like gold, silver or oil.  


If you are interested, here is one of the best places to buy gold in Tokyo. 

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Keywords: debt, sales tax, keynesian, consumption tax,