Frequent readers will know I’ve kept an eye on Japan during our race to the bottom. I’m still not sure who’s going to win and be the first to collapse. But, as I’ve stated about Japan, their problems are many, and too many to overcome. I’ve stated several times that they can’t win in their QE madness. And, now they’re showing a fundamental problem beyond QE which I’ve detailed a few times.
TOKYO (AP) — Japan’s trade deficit ballooned to a fresh record for September as costs for imports of food and other necessities outstripped growth in exports.
Preliminary customs data Monday show September’s deficit was 932 billion yen ($9.5 billion), the 15th consecutive monthly shortfall. …
The yen has weakened by almost 25 percent against the U.S. dollar in the past year, making Japan’s exports cheaper overseas but also raising costs for imports.
Imports of oil and gas accounted for nearly a third of the total but fell 1 percent as oil prices moderated. Imports of soybeans and other food and machinery surged at double-digit rates.
You see, they’re now exporting wealth in two manners. One, is their QE. They’re printing money, but, the money is going overseas. Why? Because that’s where most of the Japanese owned production plants are. But, now, because they’ve weakened their Yen, they’re paying more for imports.
What people have to realize is that each national economy is different. Yes, the same laws of economics apply, but, they apply unique to the situation each nation is in. Let’s quickly examine Japan’s situation.
They grew to an economic powerhouse because of cheap labor and a refinement of the American economic and business structure. But, that was 40 years ago, peaking 20 years ago. But, what didn’t peak was their increasing opulence and governmental largess. Today, relative to the rest of the east Asian nations, they enjoy a good standard of living. But, where does that standard derive from? Most debt accumulation. Many of their production plants have long been scuttled. But, it doesn’t make any sense to open them back up because of the wages and the distance from the raw materials that they need. They really don’t have any. They have to import them. So, compare the costs of labor in Japan to say Vietnam. If you’re going to open a production plant, where would you open one? Of course, labor isn’t the only consideration, but, also energy, and as mentioned the cost of materials, etc …. Well, Japan has to import their energy, as well. This was magnified by the shuttering of the nuclear plants.
In short, Japan has very little to offer, and printing money won’t make it any better. Were I Japan, the first thing I would do is re-open the nuke plants ….. ideally making them safer in the process. Then, I would actively seek their own source of energy and fuel. Any where, any thing. The also have to accept the fact that their government simply can’t afford to carry the populace. Their debt is overwhelming them. Japan, as a functioning economy has no other route, and even then, I doubt they can make it. You may see fits of slight rises from time to time, but, it’s in a death spiral with very little opportunity to get out of it.
This is a very significant difference from where the US is. We’re both racing to the bottom, but, Japan doesn’t have many options. We have unlimited options. Our similarities are that we’re both in denial.