By The Automatic Earth
Detroit Publishing Co. Nightfall on the Ohio River at Cincinnati 1910
Prime Minister Shinzo Abe may himself be a nationalist, for what that’s worth, but there can be no doubt that his latest move in connection to the Yasukuni war shrine is also at least in part a piece of political opportunism. Abe knows he needs all the votes and support he can get, and badly.
Outrage Over Abe’s Gift To War Shrine
Japan’s Prime Minister Shinzo Abe’s gift to the controversial Yasukuni war shrine has sparked a Chinese charge that he was offering ‘a slap in the face’ to US President Barack Obama days ahead of his visit. The unapologetically nationalist Abe on Monday donated a sacred masakaki tree to coincide with the start of a three-day festival, a shrine official said. The sending of a gift has been seen as a sign that Abe does not intend to go to the shrine – as he did on December 26, sparking fury in Asia and earning him a diplomatic slap on the wrist from the United States, which said it was disappointed. Yasukuni Shrine honours Japan’s war dead, including some senior military and political figures convicted of serious crimes in the wake of the country’s World War II defeat.
But given the latest developments in the Japanese economy, any support he can get from appealing to nationalistic Japanese sentiments may be too little and too late. One gets the impression from the numbers released to day that Japan has hit sort of a financial perfect storm. The scariest number is probably that its trade deficit QUADRUPLED(!) from a year ago. All you can really say about that is it’s insane. Where the storm gets perfect is in the fact that although the yen fell close to 20% since Abe took the reins 17 months ago, exports are hardly up if at all. That is one huge defeat for Shinzo, since he caused that drop on purpose with the explicit goal of boosting exports. The flipside of that intentional devaluation is of course that imports get much more expensive, and the fall-out, pun intended, of the Fukushima disaster means the country needs to import a lot more – relatively expensive – oil and gas. Bloomberg:
Japan’s Trade Deficit Widens as Export Growth Weakens
Japan’s weakest export growth in a year spurred a wider-than-forecast trade deficit in March, adding to challenges for Prime Minister Shinzo Abe in steering the economy through the aftermath of an April 1 sales-tax rise. The 1.8% rise in the value of shipments overseas from a year earlier, reported today by the Ministry of Finance, compared with a 6.5% median estimate of 27 economists in a Bloomberg News survey. An 18.1% jump in imports helped widen the deficit to the biggest ever for the month. [..]
Export volumes fell 2.5% in March from a year earlier. At the same time, the Japanese currency’s 19% drop since Abe came to power in December 2012 has boosted import values, contributing to 21 straight monthly deficits – the longest slide in comparable data back to 1979. [..] The [trade] deficit quadrupled from a year earlier to 1.45 trillion yen ($14.1 billion), larger than a 1.08 trillion yen projection by economists. On a seasonally adjusted basis, the deficit grew to 1.71 trillion yen.
There may have been an 1.8% increase in export values from a year ago, but in Q1 2014 exports were even down from Q4 2013. Now, it’s obvious that the Japanese people may have spent more than they otherwise would have to avoid the April 1st sales tax hike, and that may have driven imports a little higher. But that also means that domestic consumption will fall going forward, and that’s another perfect hit against Abenomics, where the intended idea was to increase spending, in order to escape deflation. And who will seriously claim that the Japanese are likely to spend more when they see these numbers?
Many have seen their salaries plunge, and are looking worriedly at their savings. That started the entire deflation scenario in the first place, and Abenomics has been a gigantic failure in turning it around. As I predicted many times. If memory serves, the sales tax hike, from 5% to 8%, was supposed to bring $80 billion in revenues, meant to pay off national debt, but Abe spent $50 billion on measures to offset it, leaving a – hope for – extra $30 billion. Which is not a giant sum for the world’s third-biggest economy, and one that hardly seems worth scaring the pajamas off of all the sweet little elderly ladies for, kept up at night by nightmares about their pensions and savings.
Maybe Obama will come mainly to tell Abe goodbye, using some diplomatic version of “See ya, wouldn’t want to be ya”. Remember, Abenomics has not exactly been a free piece of policy, it’s involved a barrage of stimulus measures, and while people may lose count somewhere in between a 200% debt to GDP ratio and one way north of that, just wait till interest rates go up. Tokyo relies on those same elderly ladies to buy its sovereign bonds, but they won’t do that forever. FT:
Japan Posts Largest-Ever Trade Deficit (FT)
Japan suffered its largest-ever trade deficit last fiscal year, underlining a wrenching structural shift for an economy long renowned as an export powerhouse. The gap between the value of Japan’s exports and that of its imports grew by more than two-thirds in the 12 months through March, to Y13.7tn ($134 billion), according to government data released on Monday. It was the third consecutive fiscal year of deficits, the longest streak since comparable records began in the 1970s. Toyota, Hitachi and other large Japanese companies have enjoyed soaring profits as a result of the weaker yen, which has fallen by a fifth against other major currencies since November 2012.
But the improvement has come less from increased exports than from flattered exchange rates on overseas sales. Japanese export volumes have barely risen and the yen value of goods shipped to foreign markets has increased much more slowly than the value of imports. Exports actually declined slightly by volume in January-March compared with the previous quarter, by 0.2% on a seasonally adjusted basis, according to calculations by Credit Suisse, even as imports grew by 4.5%. “Import volume growth appeared stronger than we had envisaged,” said Hiromichi Shirakawa, the Swiss bank’s chief Japan economist. [..] National fuel imports jumped by 18% by value last year, according to Monday’s trade data…
Japan resembles a sinking ship more than anything else these days. The only parties that make out like bandits from Abenomics are the usual suspects, banks and other multinational corporations. And while they may be inclined to, or coerced into, invest their additional profits in Abe bonds for a while, they can buy Greek and Italian paper that has much higher yields that Japan’s 0.6% or so, and is implicitly guaranteed by the EU. And then Abe has another headache:
Fukushima No. 1 Boss Admits Water Woes Out Of Control
The manager of the Fukushima No. 1 nuclear power plant admits to embarrassment that repeated efforts have failed to bring under control the problem of radioactive water, eight months after Prime Minister Shinzo Abe told the world the matter had been resolved. Tokyo Electric Power Co., the plant’s operator, has been fighting a daily battle against contaminated water since Fukushima was wrecked by the March 2011 earthquake and tsunami. Abe’s government pledged half a billion dollars last year to tackle the issue, but progress has been limited. “It’s embarrassing to admit, but there are certain parts of the site where we don’t have full control,” Akira Ono told reporters touring the plant last week.
He was referring to the latest blunder at the plant: channeling contaminated water into the wrong building. Ono also acknowledged that many difficulties may have been rooted in Tepco’s focus on speed since the 2011 disaster. “It may sound odd, but this is the bill we have to pay for what we have done in the past three years,” he said.
Three years after the quake, Japan still blunders its way through the aftermath. When is that going to change? When the sea water off Seattle and Vancouver turns radio-active? Wonder what Obama will have to tell Abe about this, and what part us proles will be allowed to hear about? Also wonder what the Japanese people will say when Abe, inevitably because of the dismal economic numbers, starts suggesting firing up the nukes again, and someone suggest it might have been a better idea to evacuate Tokyo after all.
Then again, I doubt it’ll all be Abe’s worry much longer anymore. Still, maybe we ourselves should worry a bit more about what happens when a nation and economy the size of Japan must begin sending out Mayday signals. By the looks of it, it will soon have its back against the wall. And that can lead to desperate things. Which I would think Abenomics already is/was, but that was domestic. What if the desperation starts looking beyond the Japanese borders?
• Japan Posts Largest-Ever Trade Deficit (FT)
Japan suffered its largest-ever trade deficit last fiscal year, underlining a wrenching structural shift for an economy long renowned as an export powerhouse. The gap between the value of Japan’s exports and that of its imports grew by more than two-thirds in the 12 months through March, to Y13.7tn ($134 billion), according to government data released on Monday. It was the third consecutive fiscal year of deficits, the longest streak since comparable records began in the 1970s. Toyota, Hitachi and other large Japanese companies have enjoyed soaring profits as a result of the weaker yen, which has fallen by a fifth against other major currencies since November 2012.
But the improvement has come less from increased exports than from flattered exchange rates on overseas sales. Japanese export volumes have barely risen and the yen value of goods shipped to foreign markets has increased much more slowly than the value of imports. Exports actually declined slightly by volume in January-March compared with the previous quarter, by 0.2% on a seasonally adjusted basis, according to calculations by Credit Suisse, even as imports grew by 4.5%. “Import volume growth appeared stronger than we had envisaged,” said Hiromichi Shirakawa, the Swiss bank’s chief Japan economist.
Japan’s energy import bill has risen sharply in the wake of the Fukushima nuclear accident in 2011. All of the country’s operable atomic reactors are offline pending safely reviews, robbing Japan of a power source that provided 30% of its electricity before the disaster. Utilities have been forced to buy more foreign oil and gas to make up the difference, and a weaker yen has made each barrel that much pricier. National fuel imports jumped by 18% by value last year, according to Monday’s trade data. Japan’s economy has been growing for more than a year, but a dependence on domestic consumer spending has left it vulnerable, experts say, particularly given an increase in the national sales tax that took effect on April 1.
Experts expect gross domestic product to contract in the current quarter, in part because many consumers brought purchases forward to beat the tax rise, and the question is how quickly the economy will shake off the effects of the tax increase. Pre-tax-hike demand was likely responsible for some of the unusually sharp increase in imports, experts said, suggesting growth in the trade deficit could slow beginning this month. March’s deficit was Y1.45tn, higher than the roughly Y1tn average forecast of economists surveyed by Bloomberg.
Japan’s weakest export growth in a year spurred a wider-than-forecast trade deficit in March, adding to challenges for Prime Minister Shinzo Abe in steering the economy through the aftermath of an April 1 sales-tax rise. The 1.8% rise in the value of shipments overseas from a year earlier, reported today by the Ministry of Finance, compared with a 6.5% median estimate of 27 economists in a Bloomberg News survey. An 18.1% jump in imports helped widen the deficit to the biggest ever for the month.
Exports by volume fell the most since June last year, suggesting external demand may fail to provide much support for an economy set to contract this quarter. A spending spree ahead of the tax increase boosted imports, already swollen by a surge in energy costs due to the yen’s slide and nuclear shutdowns. “In spite of the continued weaker yen, the performance of Japanese exporters is quite weak compared to competitors like Korea or Taiwan,” said Junko Nishioka, chief Japan economist at Royal Bank of Scotland Group Plc in Tokyo. The trade balance will deteriorate “unless the government decides to restart nuclear power plants,” she said.
The rush demand ahead of the tax increase could have prompted companies to divert shipments to the domestic market, rather than overseas, crimping export growth, said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. Abe’s drive to shake off more than a decade of deflation and economic drift helped drive down the yen, boosting profits of exporters such as Toyota Motor Corp. even as shipment volumes remain sluggish. Export volumes fell 2.5% in March from a year earlier. At the same time, the Japanese currency’s 19% drop since Abe came to power in December 2012 has boosted import values, contributing to 21 straight monthly deficits – the longest slide in comparable data back to 1979. [..] The [trade] deficit quadrupled from a year earlier to 1.45 trillion yen ($14.1 billion), larger than a 1.08 trillion yen projection by economists. On a seasonally adjusted basis, the deficit grew to 1.71 trillion yen.
The manager of the stricken Fukushima nuclear power plant has admitted not having full control of the facility. Contrary to the statements of the Japanese PM, TEPCO’s Akira Ono said attempts to plug the leaks of radioactive water had failed. “It’s embarrassing to admit, but there are certain parts of the site where we don’t have full control,” Ono told reporters touring the plant this week, reported Reuters. Last year, the Japanese PM attempted to assure the world that the situation at the stricken nuclear power plant was under control. However, over the last couple of months the clean-up procedure at the plant has been fraught with difficulties.
Tokyo Electric Power Co (TEPCO), the plant’s operator, has consistently faced contaminated water leaks at the Fukushima plant.Water has to be pumped over the facilities stricken reactors in order to keep them from overheating, but this process creates large quantities of contaminated water which has to be stored in tanks on the site. Ono acknowledged to press that in TEPCO’s rush to deal with the stricken facility following the earthquake-triggered tsunami in 2011, the company may have made mistakes. “It may sound odd, but this is the bill we have to pay for what we have done in the past three years,” he said. “But we were pressed to build tanks in a rush and may have not paid enough attention to quality. We need to improve quality from here.”
The manager of the Fukushima No. 1 nuclear power plant admits to embarrassment that repeated efforts have failed to bring under control the problem of radioactive water, eight months after Prime Minister Shinzo Abe told the world the matter had been resolved. Tokyo Electric Power Co., the plant’s operator, has been fighting a daily battle against contaminated water since Fukushima was wrecked by the March 2011 earthquake and tsunami. Abe’s government pledged half a billion dollars last year to tackle the issue, but progress has been limited. “It’s embarrassing to admit, but there are certain parts of the site where we don’t have full control,” Akira Ono told reporters touring the plant last week.
He was referring to the latest blunder at the plant: channeling contaminated water into the wrong building. Ono also acknowledged that many difficulties may have been rooted in Tepco’s focus on speed since the 2011 disaster. “It may sound odd, but this is the bill we have to pay for what we have done in the past three years,” he said. “But we were pressed to build tanks in a rush and may have not paid enough attention to quality. We need to improve quality from here.” The Fukushima No. 1 plant, some 220 km northeast of Tokyo, suffered three reactor core meltdowns in the world’s worst nuclear disaster since Chernobyl in 1986.
The issue of contaminated water is at the core of the clean-up. Japan’s nuclear regulator and the International Atomic Energy Agency say a new controlled release into the sea of contaminated water may be needed to ease stretched capacity as the plant runs out of storage space. But this is predicated on the state-of-art ALPS (Advanced Liquid Processing System) project, which removes the most dangerous nuclides, becoming fully operational. The system has functioned only during periodic tests.
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