Japan brings negative interest rates era to an end with first hike in 17 years
cnn.com
cnn.com
There is so much context required to interpret this, it really needs to be part of a "Japan Economy" wiki rather than a stand alone article.
But best of luck to Japan. Nobody ever asks for my opinion, but IMO it'd be sensible to let the markets set the interest rate. The evidence that markets are weak at setting interest rates is itself quite flimsy.
I'm not sure what you mean by this. The interest rate policy is linked to the money creation/destruction process, which is ultimately a centralised state function. Banks create/destroy the money, but the pace at which they can do so is governed by interest rates.
I don't understand how the market would be able to set that rate. You'd need multiple entities acting as "central banks", and somehow competing?
What do you have in mind?
The idea that it is proper to adjust the rate of monetary creation based on the market is suspect. It can't create wealth, it can create confusion and is looks suspiciously like a distortion that results in asset owners becoming wealthy at the expense of someone else. Asset prices appear to inflate more in line with the M2 - somewhat faster than the CPI, suggesting that asset owners are getting more benefits from this policy than anyone else. I don't see why they need an extra boost given that they already own productive assets.
Basically; at the moment the system is designed to penalise anyone who tries to preserve wealth in actual cash and as collateral damage prices keep eternally climbing. Neither of those things is helpful and if anything it just makes it harder for people to make rational decisions. It is confusing policy with no theoretical upside that has been drawn to my attention.
And yes, system is such that it penalise anyone who tries to preserve wealth in actual cash and that is for very good reason! If you want to preserve wealth - it's easy just buy wealth (stocks, real estate, land). If you want preserving wealth without exposure to asset class fluctuations then you want insurance and in any rational market insurance costs you money. Keeping cash is safe and it costs you - exactly as it should be.
Why is it preferable for people to hoard land than money? Land is a tangible and productive asset; if I had to choose between the two, I'd rather that it be efficiently allocated than that money were. Only those people who desperately need land, in order to make productive use of it, should have any financial incentive to own it.
That begs the question, is even more regulation really the best solution?
Other assets are (supposedly) productive - investing in companies lets them do research, pay employees, etc, investing in property improvement (as opposed to land) gives more people nicer homes.
> That begs the question, is even more regulation really the best solution?
Even more than what? These regulations would improve things. Which particular regulation do you feel is harmful?
Allegedly, "if you want to preserve wealth - it's easy just buy wealth (stocks, real estate, land)."
In other words, this is intentional to push people towards preserving wealth in the form of assets. But this creates issues where assets become over-valued - and some assets (real estate and land) are necessary to survive.
Your proposal is to tax the ownership of assets (i.e. the preservation of wealth) in order to ... push people back towards capital (i.e. for the preservation of wealth)?
This doesn't really compute.
Inflation is a sort of (not very effective) flat wealth tax. But inflation is necessary because in a deflationary system the best investment is holding cash, which makes everything freeze up.
Wealth should be (minimally, progressively) taxed, mainly to prevent serious distortions when someone has $1B in the bank and most have $10K.
Taxes, regulations, and subsidies on assets needed to survive (shelter, utilities, food, medicine) are necessary to keep these items available to everyone, because the market tends to break down in these situations.
It creates an incentive to create and hoarde value. Western real estate as a market being broken is orthogonal to the system. (Case in point: Japan.)
It’s had three decades of flirting with deflation. Its price levels have been rising for at least the last decade [1]. (Albeit, not steadily.)
As an aside, the fact that the purchasing power of the US dollar has fallen substantially over that time, while the exchange rate of JPY to USD has risen, is something quite fascinating to me. I don't see it discussed nearly enough.
Not contesting—this makes sense—but do you have a source?
> the fact that the purchasing power of the US dollar has fallen substantially over that time, while the exchange rate of JPY to USD has risen, is something quite fascinating to me. I don't see it discussed nearly enough
It’s the widowmaker carry trade. FX traders and macro funds love talking about it.
It comes down to the difference in international versus domestic demand for dollars per se, not dollars in any form (e.g. Treasuries).
The widowmaker carry trade reflects the currency side, but what fascinates me is that for example, a tube of toothpaste (random example) has gone to $3~$4 in the US, while it's still $1 in Japan. Go to a dollar store in Japan (except for Daiso) and it's full of cheap, high-quality goods that are made-in-Japan, from plastic organizers and pencil cases to measuring tapes and bicycle stickers. Those are now cheaper than similar made-in-China products being sold in the USA. The cost of container shipping is still quite low. So you'd think Americans would be hungrily importing Japanese goods until the arbitrage opportunity disappeared, but they're just... not. And perhaps that reflects that the most significant and long-lasting component of inflation in the US is shelter, which can't be imported.
I know many people are convinced that the value of money comes from its scarcity, but it's actually a very limited view: An even more important characteristic of money is that it must be abundant enough. That's why humanity spent most of history using gold and silver as support for value and not diamond and platinum.
That's the neat part with credit-based money: it's generally produced in just the amount you need for the economy. But another problem arise in case of financial crisis: banks can run out of liquidity if other banks refuse to lend them, and it has a catastrophic effect. That's what central banks are made for: they are lenders of last resort.
The problems you are referring to aren't really related to monetary policy itself, but about fiscal policy: when you try solving all problems (namely aggregate demand being too low) with monetary policy alone, you end up in weird places.
Long before bitcoin, Gresham's Law already said that, given the choice between spending soft money and hard, people will spend the soft and hold the hard.
https://en.wikipedia.org/wiki/Gresham's_law#Theory
If the grocery store and tax man accepted Monopoly's in-game currency, I would likewise expect people to spend that before U.S. currency or bitcoin.
If bitcoin were legally valid for all debts public and private… would people still hodl?
Gresham’s law applies to anything used as money. Which I would still argue does not apply to Bitcoin, as it’s transitioned into a store of value versus functional currency.
It’s not obvious how to apply Gresham to a conversation about dollars and bitcoins. Legal tender parity would be one way to make the law apply.
Correct. Or, more classically, a nominal value and commodity value. Whether it’s legal tender isn’t functionally germane (though historically, it is).
> not obvious how to apply Gresham to a conversation about dollars and bitcoins
Bitcoins have a sloped demand curve. Liquidating ten billion U.S. dollars gives you ten billion dollars. Liquidating the same in Treasuries gives you almost ten billion dollars. Liquidating the same in Bitcoin yields an unknown amount—the commodity value of a basket of Bitcoin that size. The gap between the quoted “value” and that true value of a given aggregate creates a localised Gresham effect.
No. Legal tender makes something required to be accepted at face value for extinguishing debts. Nominal value is a broader concept.
Treasuries, for instance, have a nominal value without being legal tender.
This is exactly what we mean when talking about banks running out of liquidity though.
Subprime mortgages, toxic assets, and excessive risk-taking is about trust and risk. When the government becomes the debt insurance, then that risk get managed through stricter banking regulations. Liquidity do not make a bad debt less bad. At best it can hide the problem as the bank tanks the loss, but that only works as long the bank is profitable.
An other interesting example was the Icelandic financial crisis, where the Sovereign debt defaulted on loans from UK and Netherlands. This caused diplomatic problems, including threats of cutting of the Icelandic banks from the global banking network. The value of the Icelandic currency sharply dropped in relation to other currencies, and the Central Bank of Iceland became unable to act as a lender of last resort. The solution in the end was a international bailout support program, including securing more debt from other nations to pay existing debt. This renewed trust in the sovereign debt, but also the trust in the currency and the government.
The Fed and FDIC are separate. Central banks help with the liquidity problem. Deposit insurance solves it.
It remains a core risk. But risks have to be managed. Problems are unsolved.
It seems you are somehow conflating “liquidity issues” with “what happens with customer's bank account”, as if bank runs were the only kind of liquidity issue that could happen to a bank, and then arguing that this isn't the case. But that's not my point in the first place!
Commercial banks need to borrow (central bank) money every once in a while to meet their liquidity needs, there doesn't need to be a bank run for that to happen, and if at that time nobody wants to lend, they are dead. Fortunately they can get the liquidity they need from the central bank directly at the discount rate, and we don't have a financial crisis every other year like what happened just before the Fed was created.
Yes. This is what we have been discussing. This is solved.
What you describe happened a year ago. If the bank isn’t insolvent—if it’s just a liquidity issue—that is a solved problem with deposit insurance in America. We fold it, put it into receivership, everyone keeps banking, next day is stressful for accountants. Even without the central bank’s involvement.
Of course bitcoin is broken in many additional ways, but the economics doesn't make sense in the first place. (And it was created and promoted by people who were confident that the Fed's intervention in 2008 was going to trigger hyperinflation, what happened in the following decade should give you a pointer how economically literate these people are).
That’s fine. That’s a store of value. Stocks and bonds aren’t currencies either.
Open to question how bad though; there isn't really such a thing as a good currency. If the argument is that the US dollar is the best we have it is a bit of a disaster; it can't even be used to compare values over a 12 month span, the inflation is significant. And as I recall the abandoning done in the US was because because Nixon said the US government wasn't winning the game and flipped the table as opposed to any fair process, vote or even market consensus that gold was a bad idea.
I'd agree if the argument was to anchor currency value to an energy commodity to preserve some sort of $/Joule energy measure. That'd be really helpful for using money to track value. I'm still not sure why people are so unhappy at the idea of using money to track some constant amount of value.
> I'm still not sure why people are so unhappy at the idea of using money to track some constant amount of value.
What's the grand cosmic purpose of having something that holds a "constant amount of value" (whatever that means)?
Well, if a sandwich shop was selling sandwiches for $10 last year and $11 this year, it'd be convenient for me to have a way of telling if the real price of a sandwich has gone up without needing to do any calculations and look up statistical data. I think most people would benefit from that sort of comparative power to be honest; it is difficult to keep track of whether the offers being made are better or worse value as time passes. If the value of money were constant, then a $11 sandwich in 2024 would be guaranteed more expensive than a $10 sandwich in 2023.
I've talked to several people who are convinced the economy would collapse if that sort of constant pricing was normal practice. I have reservations about their claims.
You can’t. You need more data. Otherwise, you wind up trying to mandate what a wheat plant does by law. The simple answer is a siren’s call.
And if we anchored the unit of measurement to some commodity - which appears to have been standard practice for most of human history, I might add - then we'd be able to get a pretty good estimate of relative real changes in prices. It'd be more accurate than the current system of targeting constant price changes.
It wouldn't be perfect, but the current policy is basically printing money and handing it out to asset owners - which is not only imperfect but wildly unfair, distorts markets in unhelpful ways and looks a lot like it is heading for a large financial collapse.
Look at the variance about 2%. Except now you risk depression. Which means when you get it a little wrong, you get people and companies defaulting on loans and mass lay-offs.
> if we anchored the unit of measurement to some commodity - which appears to have been standard practice for most of human history
The theory for why this is a bad idea was written in the 19th century and practice the 20th. Also, if you’re concerned about the rich getting richer, deflationary and anti-growth commodity money is the opposite of what you want.
I'm not worried about the rich getting richer. I'm worried about market distortions and unfairness. I think everyone should be getting richer; the rich included.
> Which means when you get it a little wrong, you get people and companies defaulting on loans and mass lay-offs.
So, not much change from the current state? We have a big financial crisis about once a decade, usually accompanied by mass layoffs and bankruptcies.
Besides, defaulting on loans and layoffs isn't when the damage is done. The damage is done when bad loans are made and people are hired for jobs that aren't actually value-creating. You're complaint here is that we would be detecting and recognising real economic damage - that is something we should be doing. If people make bad loans they shouldn't get to pretend they made good ones, and people should be redeployed from low-value jobs to high-value jobs. There is no point making people do bullshit work.
You’ve been provided with several in these threads. A good start might be Mankiw’s Money & Banking. It’s a standard introductory text and addresses many of the common misconceptions you’ve brought up.
And unless I have the wrong Mankiw, that doesn't look like a 19th century book.
The 19th century source is Bagehot. But that won’t make sense without the above fundamentals. (Bernanke’s work on the Great Depression is also a good empirical study on deflation. But again, not worth tackling until after one of the Money & Bankings.)
This is the core problem of economics. If we solve it, we solve, well, the economy. Nobody would need to buy anything; we could just produce and send everyone what we know they want. No need to consider unpredictable variations in individual choice and discretion.
Of course when you include that pesky individualism, this model breaks down. Because it becomes impossible to structure production today to perfectly meet demand tomorrow. Making currency transformations across eons breaks down because it doesn’t make sense to ask how many talents of silver Caesar would have paid for an iPhone.
> talked to several people who are convinced the economy would collapse if that sort of constant pricing was normal practice
No? Are you confusing what you described—which is the aim of price-level targeting—with fixed-price policy?
There are people who seem to literally believe that without inflation people will refuse to invest in anything and choose to return to a cave-dwelling existence. I don't know how prevalent they are, but they turn up in these sort of threads.
No. The problem comes without increase of the money supply. If there isn't enough growth to support the growth of the economy, then yes you're definitely hurting it (and if the supply is fixed, then your economy is going to be practically deadlocked).
The nice thing with commodity currency in the preindustrial era is that they accumulate roughly like the overall capital accumulation and productivity so it kind of works (it's not optimal though, and the massive increase of supply from the “new world” and the adoption of credit-based paper money triggered a period of higher growth that eventually led to the industrial revolution).
There's debate on inflation itself, but the economic consensus is in favor of price stability and that's what central bank are targeting. The reason why they are targeting 2% and not 0% is something you can learn from any book or economic resource on the internet, but there's nothing we can do against the fact that you somehow decided never to document yourself on the subject…
Your stance of “I've no idea how the works works or why it works this way and I won't try, but it definitely suck and doing this instead would be better” doesn't make you look good, you know?
Yeah, I’ve seen them. They’re wrong. The point is price levelling is computationally expensive. It can never come for free. If your economy is dynamic—let alone growing—prices will slip. From time to time, they will do so in a generalised form.
I actually think policymakers’ aversion to deflation comes from its intractability. Lots of societies have collapsed before they could solve deflation. Our examples of inflationary shitshows is partly due to their resilience—a deflating society starves fast.
Are there? What were these societies?
If I go to the deflation page on Wikipedia (https://en.wikipedia.org/wiki/Deflation) the preponderance of examples are places that are actually pretty nice to live and as far as I can see have uniformly not collapsed.
Given that the German economy then failed; I don't think that is necessarily a reasonable example of failed internal policy. It would be reasonable to interpret it as a society burdened with too many debts to foreign powers with no way to recover.
Possibly not of course, I do suspect that the problem is bad debts and the deflation is the last straw before things go bad. There are some well established links between debt and sudden collapses and I tend to blame the debts.
The Great Depression.
Here is a paper that argues deflation is fine: https://www.nber.org/system/files/working_papers/w10329/w103.... It’s incredibly convoluted and unorthodox.
See the GFC as an example. The US economy was about to implode, but the govt stepped in and said, heck no, not on my watch and fixed it. Instead of taking many many decades to right itself, we did it in 1 and the US govt made a nice profit to boot.
A counter point is Japan, they chose not to fix their capital markets and it's 30+yrs later and they finally are getting back on track.
At this point it's pretty clear that you have very strong opinions on stuff you have very shallow familiarity with, and the only way to fix that is to actually try understanding how the system works.
That is a feature of the current monetary system. Excessive inflation is bad, but reasonable inflation is a design goal. Cash isn't meant to be hoarded, its meant to be spent and invested. How would you encourage investment in a non-inflationary currency? Thats the problem with bitcoin, people want to hodl but not spend.
Returns on actually profitable investments would be the motivation. Turn the question around for a minute. Do we want an economy that forces people to make unprofitable investments simply to hedge against inflation? Do we want people to have to gamble or lose their assets?
Yes. 0-velocity money isn't good for economic activity.
Correct. This is an unfortunate fact that most try to sweep under the rug, but when it comes to weighing capital vs labor - the system is exactly what it says on the tin: "Capitalism."
In some ways, they are even in conflict with many of the more Market driven philosophies.
This is like mandating a city’s thermostat ratings—in degrees on the dial, not temperature—be set months in advance. The source of the variation isn’t the thermostat. It’s the weather.
> idea that it is proper to adjust the rate of monetary creation based on the market is suspect
It’s possibly the most empirically supported finding in macroeconomics. Fortunately, there is never a shortage of populists or anarchy providing counterexamples.
> the system is designed to penalise anyone who tries to preserve wealth in actual cash
Yes, we separated the transactional (deposits) and store-of-value (Treasuries) functions of the U.S. dollar decades ago. Storing value in cash is literally using money wrong.
... he asserts confidently while providing literally no examples or counterexamples. Or explaining the analogy - I don't adjust my thermostat very often, I know the temperature that I like, so setting it years in advance is feasible although weird. And governments mandating thermostat settings is a value-destructive idea - much like governments mandating that people use a specific currency (the argument there seems to be that it is necessary for the tax system to function, which is fair, but the mandate isn't value-creating).
> Yes, we separated the transactional (deposits) and store-of-value (Treasuries) functions of the U.S. dollar decades ago. Storing value in cash is literally using money wrong.
"We've implemented this policy on purpose" isn't a valid argument. A year or so ago Sri Lanka implemented a ban on fertiliser. They then had a food crisis because the policy worked as designed. The argument should be "here are the pros, here is the argument/evidence that the pros outweigh the cons". Deliberately doing something stupid just makes it more stupid.
(This actually also applies in bitcoin! It's just that because bitcoin credit markets are extremely poorly developed the M2 is both much closer to the M0 and much harder to measure. There are also several completely uncontrolled dollar-flavoured tokens circulating on exchanges such as Tether.)
Why can't you control M2? Because issuance of credit is decentralized.
The hard money people would like to split out deposit-keeping (which would inevitably have to charge, not pay interest) and lending out (which would have to be limited to the amount of equity available, as it is to e.g. VC funds). This would make business credit, consumer credit, and mortgages much more expensive.
> designed to penalise anyone who tries to preserve wealth in actual cash
These people are a tiny minority of outliers and trying to force up the cost of credit, on which the real economy runs, to benefit them is pointless.
(also, the Japanese system rewarded cash holders! Bank depositors got paid nothing: https://moneykit.net/en/guide/yen/
"As of 20, 3, 2024, the interest on Yen savings account is 0.001%. Interest will be taxed at 20.315%")
It is plausible to me that the group that owns the most Japanese Yen get to set the rate. That group can decide to tread water or start to charging outsiders for use of the capital.
Warning the above is wild speculation from a stranger on the internet.
We tried that and it was completely untenable. During the 1700s and 1800s more and more of society switched from the non-monetary economy to the monetary economy, and more people went out and got jobs for money, and at the same time economic growth became entirely dependent on debt, so that by the late 1800s the Western nations were witnessing wild swings, where the economy would grow 15% one year and then crash into a 10% depression the next year, then grow 14% a year for two years and then have another major depression. The instability was leading to revolution in many countries. In the end, the government had to step in and regulate the speed at which new debt could be issued, so as to smooth out the business cycle. Britain did this first. In the USA the idea of a central bank was much contested during the 1800s but finally it was made official in the early 1900s.
The economy functions the same way in Japan in the same way that computers function the same way in Japan, just with a different input method and currency symbol (円).
In order to understand the Japanese economy today, one really needs to read books about Japan's bubble in the 1980s. The interest rates Japan experiences today are the result of this. In a way, that makes certain aspects their economy very different from that of any other major Western or Asian country.
I would recommend reading "The Bubble Economy" -- which was published in 1992 and thus gives a more closer point of view. The author believed there was an imminent and abrupt price correction, it turn out to be worse and drawn out over decades.
Secondly, "Devil Take the Hindmost: A History of Financial Speculation", published in 2000. The part about Japan's bubble was more concise than the "The Bubble Economy" and has some bits the first missed.
One of the best things about both of these books is they were written before the subsequent dot com bubble and housing bubble in the US.
Japan provides a good lesson on just how drawn out recovering from gross misallocations of capital during bubbles can be, even in very wealthy and developed countries. In Japan's case, it has had a multi-generational impact which continues today.
Have they really not changed their thinking in all that time?
We in the west have had at 3-4 major financial crashes in the intervening period - and innumerable changes in government policy.
And how do they do that in aggregate?
Some entity somewhere will have a debtor balance in Yen with the Bank of Japan.
But that's what's happening (at least with the Fed, it's difference for ECB): the federal funds rate is actually a market rate! What the Fed does is that it sets two other rates that act as a ceiling (the discount rate) and a floor (the deposit rate) for the Federal funds rate. And then the Fed decides a target rate for the Federal funds market, that fits with their inflation target. If you remove the Fed out of the equation (just for this aspect of their intervention), the the Federal funds rate will move freely but then you have no guarantees that you'd have decent level of inflation…
Are you suggesting there’s no correlation between market set interest rates and central bank rates?
Actually, markets do set most of the interest rates. The central bank only sets one (to be technically correct several) specific interest rate. Usually, this rate sets the price for short-term refinancing operations of private banks with the central banks. Obviously, other interest rates are influenced by this rate indirectly.
I guess the reason for this approach is that banks can react flexibly to high demand for central bank money (aka cash). For example, if people want to hold more cash suddenly, the central bank will swap cash with good assets from commercial banks (aka printing money) so that they can hand it out to them. With a fixed money supply, interest rates would skyrocket in this case. Just because I want to have more cash rather than see that number on my checking account doesn't make a difference economically and so it should also not influence the interest rate.
Thus if you hold the cash, you can attempt a corner in order to obtain a large fraction of the collateral: you hold the cash so that people can't get it and default on their loans. Thus you obtain a large fraction of the collateral, something of enormous value.
What central banks do when you try to do this is that they start printing money, thus this scheme can be stopped. If there's no central bank to do this, the self-interested cash holders could potentially coordinate something like this.
I think the cause of yield curve inversion can be something of this sort, because it can mean that people expect a crash and want cash on hand to buy assets once it has happened, so they don't want to lock their money up for six months, even if the yield is quite high.
Japan has done a lot of innovative things trying to claw itself out of the post bubble hole.
Markets are incapable of strategy and thus can't be trusted with all decisions.
Now that worldwide inflationary pressure is much higher, you're seeing rates rise everywhere. Of course, rates are different from country to country, but directionally, there's nothing novel about what's happening here.
You're saying you can't generalize, but on the contrary, there's a very obvious generalization here.
How would that be relevant...?
> they are basically a clone of the US
I don't necessarily see this frame in the article. If you mean that it cites "american" indicators, it's because those are pretty generic economic indicators shared by pretty much any capitalist economy. Are they the full picture? Certainly not (their infamous public debt, just to mention one, is not mentioned), but mentioning them doesn't imply that they are "basically a clone of the US".
> it really needs to be part of a "Japan Economy" wiki
I mean, each and every country needs its wiki, but life is short.
> IMO it'd be sensible to let the markets set the interest rate
I'm not sure what you mean - leaving banks free to set interest rates? Nobody in the world does this currently. Or just having an independent central bank? The BOJ is more or less as independent from government as the Federal Reserve or the European Central Bank (at least formally).
> How would that be relevant...?
私の懸念は、私が同意しないことと、一次資料のレビューには障壁があることです。グーグル翻訳でも。
Japan is practically the 51st state in the union, geopolitically speaking.
This is an article about Japan raising its interest rate, and people are using it to discuss the abolishment of central banks, or of state-backed currency itself in favor of cryptocurrency.
For those that don't see this: it'd be like if you wandered into a forum where an article was posted about some new product Google released, and the discussion is dominated by a bunch of people talking about how all C++ code should be abolished in favor of Python.
Very bizarre, disorienting experience.
I mean, we do sometimes get that with Rust, so...
Maybe one of these days I should do an easily understandable simulation web toy that people can fiddle with.
Those who can, do; those who can't, write "threads" on twitter
A lot of the degradation in "MSM" appears to be due to the severe cost cutting occurring within News Organizations, leading to more sensationalism, less hard reporting, and way less editing and fact checking.
And this is happening in the UK (BBC layoffs, Guardian almost exclusively using freelancers), Canada (CBC layoffs, BCE layoffs), and much of Western Europe as well.
The era of Amanpour reporting in the middle of a warzone are long gone, and non-Western alternatives are government owned and share similar biases (eg. Al Jazeera and anything remotely related to Qatar's mortal archrivals Saudi or UAE, CGTN and China's world view, WION and Indian media's tendency to overexaggerate, etc).
[0] - https://www.american.edu/soc/news/with-foreign-bureaus-slash...
This is really exciting to see the effects of the cost of borrowing. I see this as very different than what the US just went through. I want to see what happens to growth.
I have been thinking that the US managed to turn the COVID disruption into a soft landing.
> The importance of the Japanese postal banking system lies not just in providing a savings vehicle and financial services to the people of Japan, but also in the use of the saved funds to promote economic development throughout modern Japan's history.
...
> To promote savings which could be invested into rebuilding the economy, Japanese officials issued relentless statements advocating for austerity and instituted measures to restore confidence in the financial system.[10][4] From the 1950s, postal savings experienced steady growth and increased its market share relative to private banks, thanks to the huge availability of postal offices, attractive financial products offering good returns and preferential tax treatment on deposits from the government.[11][4]
Maybe I don’t understand what those headers in newspapers mean then.
"Hong Kong, China (Asia Pacific regional headquarters)"
is what the wikipedia page lists for CNN.
It was probably more impressive and relevant in 1930 but the convention remains for the most part unchanged.
In Japan it looks like they have CNNj which afaik is the japanese translated version of CNN.
In Hong Kong I suspect they have an actual office for editorial staff, especially someone that works on the business/finance side of reporting. It would probably not be very interesting to have a business correspondent stationed in Japan from a CNN perspective.
If you thing CNN is bad, it is because you because you never watched its franchises. The one from Brazil is a far right news outlet that disseminates fake news.
Japan was once the 2nd largest economy in the world. It had an economy bigger than china and south east asia combined. Historically, Japan was its own financial hub. Not to mention Japan developed before hong kong did. Also, Japan isn't geographically near hong kong.
Japan is basically Fordism on steroids. It has it's pros and it's cons, but it's fundamentally a different social structure and contract to North America or Western Europe (which itself have massive differences as well - someone's experiences in DACH are entirely different from the British Isles)
The only countries I can think of even safely comparing to Japan might be Taiwan, South Korea, and maybe Singapore.
Japan will not just end the world's last zero rate anchor, but will sooner rather than later begin to focus on containing rising inflation risksWe don't really know how this will play out, and people's guesses for how it will play out are to some degree already priced into the current rate.
Thats not true. It could be the case that the effect of interest rates on exchange rates is obvious to everyone, and therefore it is already priced in.
Interest rates are not an obscure, arcane thing. Lots of people in finance know how they work, and know how they effect various parts of the economy.
https://documentwomen.com/mrs-watanabe
If you can identify a flaw in a government's monetary strategy, you can always do some arbitrage to take advantage of it, and people do that.
[0] https://www.federalreserve.gov/monetarypolicy/files/fomcproj...
To the extend that it does have real word impact, is that because positive different from negative or just the absolute value equal to zero is different from nonzero?
A big surprise of the aftermath of 2008 is that investors will, in fact, tolerate a slightly negative interest rate. Big investors with tens of billions of dollars cannot simply take the money as cash, they need to put it in a bank, so if a bank imposes negative 0.1% then some investors simply consider that a fee for storing the money, so it was, in fact, possible to go slightly below zero. But the problem was, there was no way to go deeply below zero. In the USA in 2009 it was estimated that we would need an interest rate of negative 6% to get back to full employment. And of course, no investor will voluntarily take such a loss on their money. That's why monetary policy has limits. That why financial policy has to be used. However, a coalition of Republicans, along with a handful of key Democrats, such as Larry Summers, moved to block all financial policy, so we suffered several years of high unemployment.
Japan, of course, had it worse than the USA, as they are also facing demographic contraction. In their case, they used monetary policy and some financial policy, but all of it together barely offset the demographic contraction of working age adults that they have faced.
Its meaningfulness scales with the prevalence of physical cash.
If a society is cash heavy, negative rates incentivise taking out physical cash (which yields a nominal zero and thus positive-real rate.) If you can dissuade people from doing so, by law or inconvenience or the non-existence of cash, then the zero bound is mostly symbolic.
When the discount rate is negative, the value of an asset is infinite.
Looking like they have made some improvement. Not a bad curve, but a ton of improvement needed.
Not in GDP though. 265% debt to gdp is absolute bananas. They still havent balanced their budget. 56% income tax rate is crazy.
Then they have to deal with major population decline and aging population; without immigration? So um are they planning to cure death or something? Like anti-aging drugs or something? So perhaps they can turn their aging population into young population?
Something extreme like that is Japan's only hope at this point.
The question is: do they really have to? Balancing budgets is a point of economic orthodoxy in some circles, but Japan in many ways is the proof that keynesism can be sustained for generations. In the end, most of that debt is held by the Japanese themselves; as long as the country continues to effectively believe in its own future, that debt will not be a problem.
> 56% income tax rate is crazy
Why? If it works, it works. It worked in Europe and the US too, before Reagan and Thatcher brainwashed us.
> Then they have to deal with major population decline and aging population
That is indeed an issue, but again - it's largely an issue for countries that have already spent their social-security money. Is Japan one of them? I honestly don't know.
Japan is right at OECD average, just a couple spots above in tax burden for an average worker, and tax to GDP ratio. So people don’t pay the 56% published rate.
Japan is on the verge of societal collapse. Their PM literally said that Japan is on the verge of not being a functioning society. We are looking to Japan as the example of failure.
You seem to be looking at them as some sort of success? This is very confusing to me.
>Why? If it works, it works. It worked in Europe and the US too, before Reagan and Thatcher brainwashed us.
It didn't work... Europe has a GDP to debt ceiling which is being enforced. This has resulted in Spain -50% their social nets over the last little while for example.
This is also why Germany and others have a balanced budget amendment. Effectively forcing all future german politicians to balance the budget.
This decision will give EU the world order in due course. Basically just waiting on the USA to sort of bankrupt at this point, not that bankruptcy is a thing for countries. Though I do expect India will follow up in China's demise.
>That is indeed an issue, but again - it's largely an issue for countries that have already spent their social-security money. Is Japan one of them? I honestly don't know.
Because of this debt. Japan has basically lost decades. They are still stuck in the 90s effectively. They pay so much money on servicing their debt, their social nets practically dont exist and are shrinking nonstop.
> Germany and others have a balanced budget amendment.
That future Germans will likely be free to repel or ignore. Who is going to punish them, the dead? Constitutional amendments pledging this or that budgetary action are largely performative. Even EU-level rules (which have no basis in actual economic science, the writers themselves admitted to making up things like 3% debt/gdp ceiling etc) are mostly a pledge, which the big players ignore in practice whenever they see fit.
> They pay so much money on servicing their debt, their social nets practically dont exist and are shrinking nonstop.
Because society nets are expanding elsewhere...? They're contracting everywhere, you mentioned Spain yourself but it's the same everywhere. Precisely because of misplaced budgetary obsessions.
Japan is not perfect, but their model has a lot going for it.
Im not trying to persuade anyone, Im a nobody with no reach, my words dont matter. I'm not narcissistic to think otherwise.
I am totally fine with people making bad decisions. Welcome to history 101.
As for 'apocalyptic' sentences. That wasn't my words, that was the prime minister of japan's words and I agree with his conclusions. It's rather set in stone at this point, they are going to need to reduce tax burden in at least half before they'll get their fertility rates up.
>That future Germans will likely be free to repel or ignore. Who is going to punish them, the dead? Constitutional amendments pledging this or that budgetary action are largely performative. Even EU-level rules (which have no basis in actual economic science, the writers themselves admitted to making up things like 3% debt/gdp ceiling etc) are mostly a pledge, which the big players ignore in practice whenever they see fit.
They could repeal sure but I very much doubt that happens. They are already aware of the wealth benefits of maintaining a balanced budget. Switzerland especially has learnt this one.
>Because society nets are expanding elsewhere...? They're contracting everywhere, you mentioned Spain yourself but it's the same everywhere. Precisely because of misplaced budgetary obsessions.
In my other comments I explained how we're at the end of a major political movement. Yes I realize HN seems to have a hivemind thinking that this political movement is on the verge a grand success.
I actually fail to see where they are expanding?
UK 4.1 -> 2.4
France 8.4 -> 5.65
Italy 10.61 -> 3.12
Spain 5.36 -> 2.96
Australia 9.65 -> 3.84
Netherlands 7.75 -> 2.95
Canada 6.92 -> 2.58
Do I dare pull out the calculator to figure out the average decrease over the last 3 decades?
Japan and SK are worse off obviously. when this political movement failed in 1989, it really held on as hard as it could, rebranding over and over. I'm not even sure what they call themselves this week.
>Japan is not perfect, but their model has a lot going for it.
Japan does not have much going for it.
https://en.wikipedia.org/wiki/Lost_Decades
This wiki page needs updating, they are still having a lost decade. Shinzo Abe got assassinated over this.
Toyota, Sony, Panasonic, Sharp, and Toshiba.
But I look at those names and I feel like we're talking about 20 years ago. Those brands are barely holding on today.
Their population decline has already started and has already caused problems.
https://www.theguardian.com/world/2023/jan/23/japans-ageing-...
In 2012, retirement age was 60, and now its 64.
In about 2030 or so it will reach 70. This is set in stone. I dont care if Fushida fixes fertility, you cant spawn 20 year olds. So in 2040 or so Japan will no longer have the retirement pyramid scheme.
Essentially, if you're not retired already, you're probably working for your entire life. Yikes.
So much so that they... don't. https://www.reuters.com/markets/europe/germany-expects-defic...
> I actually fail to see where they are expanding?
Sorry, the sarcasm didn't come through, should have added a /s. Yes, safety nets are currently contracting everywhere, and the results have been less than stellar everywhere. Japan resisting this is not a bad thing. You fret about their retirement age, when such age is already higher than that in many European countries and being continuously raised. If anything, they lagged behind in slashing social provisions, and that is good.
> Shinzo Abe got assassinated over this.
Abe was assassinated by someone with a grudge against the cult he belonged to. Nothing to do with the economy.
This is hyperbole. People haven't even started littering, let alone any kind of wider social breakdown.
I found https://www.mof.go.jp/english/policy/budget/budget/fy2023/02... , which is fascinating; page 22 has a graph which shows that the interest payment has been roughly flat for years, due to declining rate. The social security issue is indeed a problem and there's probably going to be controversial pension reform, but it's a long way from blowing up. Also the major creditor is .. Bank of Japan.
The PM is correct and it's certainly not hyperbole.
Littering as if that's some sort of proper measurement?
Japan has a 99% conviction rate and penal labour. You're not going to litter. Japan is going to go from functioning clean place to detroit in a short period of time. That's the point the PM is making.
>which is fascinating; page 22 has a graph which shows that the interest payment has been roughly flat for years, due to declining rate. The social security issue is indeed a problem and there's probably going to be controversial pension reform, but it's a long way from blowing up. Also the major creditor is .. Bank of Japan.
Due to negative rates which just changed.
I wonder as well, you bring up pensions. Those pensioners are getting poorer by the day. There's literally no chance of long term retirement, silver crime and retirements ending soon leading into suicide is going to be Japan's future. You can write it down now, but I bet Mt Fuji forests are going to have police stationed there rather regularly to prevent suicide.
I have no skin in the game for Japan. I dont live there and if I did, I'd fast track my trip out of there. The generational warfare has sunk Japan and it's a ticking timebomb.
I dont much care who the creditor is and better yet how exactly does that work? An older generation rings up the debt bill and thinks the far fewer younger workers are going to just give up their lives and live indentured to the retirees? That's not how it'll ever go.
Lol, your credibility just sunk to zero, sorry. Debts only matter insofar as the creditor is likely to call it in. If I have a debt with someone who will never want the money back, does the debt matter at all?
This is basic stuff.
Japanese pensioners never want the money back? They plan to work forever?
My credibility eh?