Japan DeflationWhy Japan deflation is important to your and the world's survival.
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JAPAN DEFLATIONJapan Deflation - Too Many D's - Deflation, Depression, Demographics and Debt. By Delwyn Lounsbury - THE DEFLATION GURU Japan deflation continues and now your whole world is catching the disease. Japan Deflation Update: Japan deflation showed consumer prices dropping for the 23rd straight month in January of 2011 as the world's Number three economies continues to languish. The rate of decline, however, slowed due to increases in prices of food and fuel worldwide. Reduced corporate profits have resulted in years of job and wage declines. A 30 year mortgage there is now 2.5% On 1/30/2012 Japan's Health and Welfare Ministry released a grim report in which their population of 128 million will decrease by one-third to 87 million people by 2060. Remarkably, the number of people 65 or older will nearly double to 40 percent as the Japanese continue to live longer. The work force of 15 to 65 year olds will drop in half. The grim estimate places a greater burden on a shrinking working age population to fund their social security and their tax system to pay for senior citizen's needs. Prime Minister Yoshihiko Noda plans to raise the sales tax from 5 percent to 8 percent in 2014 and then 10 percent in 2015. The institute went on to say the Japan birthrate will be the lowest and the population decline will be the steepest globally. Japan's pension structure, labor policies, social security system and taxation were not designed to cope with these demographics. Can America and much of the rest of the world be far behind? The Earthquake and tsunami will cost their economy up to 6% of GDP as energy infrastructure like nuclear plants degrade and manufacturing supply lines are disrupted. The Nikkei stock average dropped 2,250 points in March down to a new low of 8,500. On March 4th, 2011, seven days before the earthquake/tsunami Robert Prechter wrote: "The Nikkei's behavior and the extreme bullishness toward it appear to be saying, again, deflation and falling stock prices are dead ahead." Japan deflation is a discouraging dysfunction of debt and depression. We all know their demographics stink. They have no natural resources. Now, it's reported 70 percent of women there are unmarried. 20 years of deflation has led to individual decisions to retrench - meaning population growth and economic recovery suffers. Also, the yen is at a major high against the dollar making their products less competitive. Now, the 3/11/2011 earthquake/tsunami has stuck a samurai sword deep into the heart of the Japanese economy. The yen carry trade is coming unwound. People all over the world have been borrowing the Japanese money at near zero interest cost and then turning around and investing in more profitable assets. As the value of the yen goes up your profits are hurt. Since 1990, when one prefecture (county) in Japan was worth the same as all of California, they have been stuck in a deflation morass. Interest rates are near zero. For years there has been an infamous "carry trade" arbitrage in which banks and hedge funds borrowed yen from the Bank of Japan and bought other investments with the money. That trade diminished at times when the yen got stronger on the world currency markets. The yen borrowers can lose their shirt when they have to pay extra for the Yen they need to repay the loans. Along with a huge real estate crash their stock market the Nikkei has dropped from 30,000 to the 8,500 range. Today, Toyota announced that production was down for the fifth straight month. The world's number one auto maker said sales were down 4.7 per cent and Prius hybrid sales were down 13 per cent due to expiration of green car subsidies back in September 2010. When a countries growth rate declines for a long period, Japan deflation give citizens sour expectations causing them to reduce spending and save more. I have heard people will wear clothes until they are thread-bare. Companies did make it a policy to avoid lay offs. Actually, Japanese companies just get weaker by not making correct business decisions and dropping unneeded workers. The U.S. is starting to display characteristics of Japan's "Lost Decade" downward spiral. The deadly Japan deflation depression disease is spreading all over the world. Copyright 2010 by Delwyn Lounsbury – THE DEFLATION GURU Use of this article allowed with attribution back to: http://www.deflationeconomy.com
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