Fitch warns of debt 'shock' for Japan

By Ambrose Evans-Pritchard, International Business Editor
Published: 5:11PM BST 22 Apr 2010

Fitch Ratings has warned that Japan's sovereign debt is rising to ominously high levels as the workforce shrinks and deflation grinds deeper, while the government's reserve assets may prove unusable for defence in a funding crisis.

The agency said Japan's gross public debt has reached 201pc of GDP and is likely to continue pushing higher into the danger zone unless premier Yukio Hatoyama starts to get a grip on public accounts.

"Japan is increasingly vulnerable to an adverse interest rate shock, given the scale of government debt and hence the volume of refinancing," said Andrew Colquhoun, Fitch's Asia specialist. "The lack of a coherent and credible plan" for fiscal discipline is likely to put "downwards pressure on creditworthiness in the medium term." (Dicen que a medio plazo.. los de Fitch no se mojan, no ven la situación explotando en Japón este año o el que viene?)

The Fitch Report comes two days after the IMF warned that the global banking crisis has mutated into a sovereign debt crisis that risks setting off a second phase of economic turmoil. (No shit, Sherlock. Cuánto mejor no les iría si siguieran este foro...)

Tokyo has until now been able to borrow at ultra-low rates of around 1.30pc for 10-year bonds, drawing on a huge captive savings pool from its own citizens. While this reduces the risk of a "temporary liquidity problem" – or `sudden death' in ratings parlance – as foreigners cut off funding, it does not protect Japan from deeper forces at work. (?Alguien ha visto datos de cuánto dinero de inversores extranjeros está captando Japón, y más específicamente en deuda pública? ?Estamos hablando de China?)

"The slow but steady drop in the domestic savings rate could eventually undercut [Japan's] ability to fund itself locally at nominal yields and makes it more vulnerable to interest rate and refinancing risks," he said. Even at the current low rates – 0.16pc for two years, and 0.49pc for five years – interest payments already match 10pc of tax revenues. This is twice the average for OECD rich states. A sharp jump in yields would be ugly.

Tokyo stresses that "net" debt at 97pc of GDP is a better indicator of Japan's health, since this takes into account the country's assets at home and abroad. Fitch said these assets may prove illusory. A chunk equal to 38pc of GDP is in the form of lending to business. "It would be difficult to liquidate these assets in the event that [Japan] encountered payment stress, and the value of such assets is uncertain," it said. A second chunk worth 20pc is in foreign reserves, mostly US Treasuries. This could not be converted quickly into yen without causing currency havoc. (Y tan incierto. Como que son los primeros tenedores de deuda pública estadounidense....)

The deflation curse is a large part of Japan's story. Falling prices alone added 1.6 percentage points a year to public debt in the decade after 1998. This has since accelerated. Nominal GDP has contracted by 5pc over the last two years, eating away at the tax base. Debt and deflation do not mix well.

Japan's economy picking up on high growth in emerging economies: BOJ minutes
English.news.cn 2010-05-10 09:29:59 FeedbackPrintRSS

TOKYO, May 10 (Xinhua) -- Japan's economy has been picking up mainly due to improvement in overseas economic conditions although there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand, according to the minutes released from April's two-day policy meeting by the Bank of Japan (BOJ) on Monday.

At the April 6-7 Policy Board meeting, the eight member board led by Masaaki Shirakawa, Governor of the BOJ, concurred that exports and production have been increasing mainly against a backdrop of high growth in emerging economies, the minutes revealed.

The BOJ Policy Board members agreed at the meeting that in addition to the increase in exports and production and the continuing pick-up in private consumption, business fixed investment was leveling out more clearly, the minutes said.

Highlighting the 2010 Tankan (Short-Term Economic Survey of Enterprises in Japan), improvement in business confidence continued, among not only large manufacturers but also nonmanufacturing and small firms, the members concurred.

The members added in general terms that in Japan's economy, signs of a self-sustaining recovery might have finally started to appear.

Additionally, some members in attendance expressed the opinion that the pace of recovery in advanced economies was likely to remain only moderate, as there was not yet sufficient momentum to support self-sustaining recovery in private demand and balance- sheet adjustment pressure continued to weigh on economic activity.

Regarding the U.S. economy specifically, members were of the opinion that the world's largest economy is recovering at a moderate pace, noting however that the employment and income situation remained severe.

Members agreed that the Chinese economy had continued to grow at a rapid pace, led mainly by domestic demand, and this trend was likely to continue. One member added that, although growth in bank lending and fixed asset investment had recently slowed slightly due to China's moderate policy tightening, the trend of economic growth had not changed.

As for the guideline for Japan's money market operations for the inter-meeting period ahead, members agreed that, given the above assessment of economic activity and prices, it was appropriate to maintain the current guideline that the Bank would encourage the uncollateralized overnight call rate to remain at around 0.1 percent.

The members agreed that, in the conduct of monetary policy, the Bank would continue to aim at maintaining the extremely accommodative financial environment.

Bank of Japan injects cash for second trading day

10:51, Monday 10 May 2010

The Bank of Japan on Monday offered two trillion yen (21.6 billion dollars) in liquidity to financial institutions for a second trading day in a row to calm markets rattled by Greece's debt woes.

The central bank offered to provide the cash in same-day operations to banks and brokerages against their collateral pooled at the BoJ.

The two trillion yen cash injection -- the bank's second since Friday -- aims to support Japanese stocks by curbing the yen's rise and making available ample funds for financial markets.

Tokyo stocks rebounded Monday on relief over a deal to help the crisis-hit eurozone with a huge aid package from Europe and the International Monetary Fund, and as the yen eased against the dollar and euro.

The Nikkei stock index ended up 1.60 percent Monday.

The single currency shot higher to 1.3037 dollars in London morning trade, up from 1.2755 dollars in New York Friday. It also bought 121.80 yen, sharply up from 116.80 yen in New York.

Finance Minister Naoto Kan said he expected the "major response" by Europe and the IMF and a pledge of support from the Group of Seven industrialised nations to help stabilise global financial and currency markets.

"With the G7 now fully backing these efforts, I expect and hope that will help stabilise global stock markets, the euro and other currencies," he said.

Kan said Japan was not thinking of taking any unilateral steps over Europe's debt problems, but that it was contributing to global support through the IMF.

The Bank of Japan on Monday also joined the central banks of Europe, the United States, Britain, Canada and Switzerland to support financial markets by preventing dollar shortages during the Greek debt crisis.

The BoJ joined the other banks in re-establishing so-called dollar liquidity swap facilities with the US Federal Reserve, revitalising emergency measures that were applied when the global financial crisis erupted in 2008.

The five Western banks earlier said the move aimed "to help improve liquidity conditions in US dollar funding markets and to prevent the spread of strains to other markets and other financial centres."

The BoJ said the swap line would be effective until January 31, 2011.

"The bank will continue to strive to maintain financial market stability through proper implementation of money market operations," said a BoJ statement after a policy board meeting.

The policy board also decided, as expected, to leave its benchmark rate at a rock bottom 0.1 percent as part of its long-running efforts to stimulate the world's second biggest economy after its worst recession in decades.

Now that Japan's population is officially dropping and will
probably continue to do so for the foreseeable future, it
is easy to predict that from here on we will start to
experience a surplus of vacant housing. Actually, this
trend is already happening in the countryside areas all
over the nation, not just from people dying faster than
they are born, but also because of the ongoing trend of
urban migration.

Indeed, last year, Tokyo was one of the few cities to
continue recording an increase in population, adding 83,000
people. And if you include the surrounding bed towns, then
the migration trend is even more obvious. So just how many
vacant properties are there in Japan? According to the
Internal Affairs and Communications Ministry in 2008, there
were an amazing 4.127m unoccupied housing units, up 451,900
from 2003.

That's a lot of unused homes.

Unoccupied homes, otherwise known as "akiya" in Japan
apparently account for about one in eight dwellings. We
could not find any definitive figures, but from our
experience, they fit broadly into three major categories:

1) The ancestral home, where all the kids have moved to
nearby cities and mom and pops are either in old age homes
or have already died of old age. These houses are
recognizable because they're older ***** homes that are
being overrun by vines and vermin, and yet no one seems to
be making much effort to stop the rot. Most such homes
should be demolished, but since this costs more than the
place might be worth, the family legally leaves things as
they are. Many of these homes are beyond repair and
although officially registered are uninhabitable.

2) Next are the apartments and postage stamp size houses
in bed towns and the countryside where people have simply
upped and moved to the city and were unable to sell the
house. Often these places have tax liens against them, and
you can often see them coming up for sale in tax
foreclosures. Check out the site •s“®ŽY‹£”„•¨Œ��î•ñ. We
have a friend in Okayama who bought one of these houses and
she was telling us about a property consisting of a
recently built log house on 60 tsubo of land, that was
being sold by the local court for just JPY3MM. That would
have been about 50% of the replacement value of the house
alone. Of course, you'd have to want to live in the deep
countryside to wind up with such a bargain. The closer you
get to the major cities, the higher the bids by people
wanting to buy foreclosed property. You can track the bids
on the website. Quite interesting stuff. All in Japanese of
course.

3) Second homes owned by wealthy city dwellers who fell in
love with a town or countryside location, bought some
property and built a house, then forgot about it. The best
way to find these places is to drive around your favorite
location and go in and pester the local real estate agents.
Favorite places to find such homes include the Izu
Peninsular, Karuizawa, and in and around Mount Fuji. Now
that several foreign banks are willing to lend against
second homes, this is quite viable as an option. We're told
the key to a bargain is to be persistent with the owner and
wait until they need the money badly enough. With the
economy sputtering along the way it is, you may not have to
wait that long.

You can find akiya all over the country, and particularly
out in the countryside. Trawling the internet has turned up
some quite interesting websites and blogs of foreigners who
have bought into local communities rather cheaply, by
acquiring a disused Japanese ***** house ("Minka") and
fixing it up. Not all the experiences being posted are
positive, but they certainly point to the fact that in the
face of declining populations, many countryside towns would
welcome anyone, even foreigners, into the midst so long as
it means the rejuvenation of their community.

One reason why foreigners are a good fit to solve the
vacant housing problem is that they are more willing to
live in older properties and to perform their own
maintenance. Japanese have been educated over the last 50
years that housing older than 25 years old should be
demolished and rebuilt, leading people to really only want
to buy new places. This writer knows this firsthand, after
a relative bought a countryside property, built a
substantial Japanese-***** post-and-beam house on the land
(and which will last another 50 to 100 years), but being
told by the bank several years ago that the house itself is
now considered to already have zero value....!

So with this in mind, we have been wondering if there isn't
a business in gathering information about akiya, and
setting up some kind of buy-sell-rent exchange center,
where a property manager would handle the details but
owners could find tenants looking for a bargain. There is
in fact such a company doing this, and we met with them
last year, but they told us that the demand by Japanese
themselves for akiya is very low. As a result, although
they are the largest handler of akiya in the nation, they
only have 4,500 dwellings on their books.

Akiya might be in low demand with Japanese right now, but
if the polarization in the economy continues for much
longer, there will be an increasing number of people who
can't be choosy. And then, of course there are the
foreigners. Our imagination quickly conjures up a program
of akiya communities in, say, Kyushu or Sado Island,
serving Chinese and students of other nationalities,
needing somewhere cheap to live while they study Japanese.
We don't know if the locals would be too happy about it,
but we figure they will get over it as the rent money starts to
flow. :-)

Or are property owners just too stubborn to want foreigners
in their midst?

The Japan Times ran an interesting article last week about
an organization called the Japan Property Management
Association, which called a seminar of 170 real estate
agents to discuss how to get more foreigners into the
vacant housing stock of the nation. Indeed, with
foreigners in Japan being the only increasing population
group, it is inevitable that they will be the renters of the
future.

The seminar basically dug up the same old stuff about the
majority (60% according to one survey) of all estate agents
being uncomfortable dealing with foreigners and not being
able to communicate. It appears that the Association is
making vigorous efforts to help overcome the language
barrier and has published guides in four foreign languages
for non-Japanese tenants, spelling out the rules of
tenancy. It is going to take a long while for old
prejudices to be broken down and certainly the problem
isn't just non-Japanese speaking foreigners not knowing
which trash to throw out on which specific day.

In the end, we wonder if the language of cold hard cash
might not overcome that discomfit? This has certainly been
the experience of another moribund area that was
rejuvenated by foreigners moving in -- we speak of
Nisseko. Sooner or later, the financial needs outweigh the
emotive ones: Maslow's hierarchy of needs at work...

17:47:22 h. Rumores Japón Serenity markets

Rumores de una posible rebaja de rating...esto se va extendiendo cada vez más, tarde o temprano llegará a EEUU

10:26:40 h. ¿China como el catalizador?
Hoy la bolsa China sube hoy un 1.1 %, cuando el resto de los mercados del área han recortado un 1.0 %. De hecho, las excepciones han sido recortes del 2.45 % de la bolsa de Japón (¿el JPY como moneda refugio? Pero, ¿hay ya monedas refugio?) y del 1.8 % de la bolsa de Corea.

Iniciado por Jordi Segurola

En mi opinion, Japon y Alemania sufren del mismo problema: falta de proyecto. Tras perder la guerra mundial, ambos paises fueron sometidos a un proceso de limpieza de cerebro (que en Alemania corrio a cargo de equipos de psicologos) a causa de los cuales los supervivientes de la guerra acabaron odiando su historia y su pais mientras el bienestar material se convertia en el unico objetivo bienvisto. Ahora, ambos paises han alcanzado el bienestar material, hay en ellos pasta para dar y regalar, pero no hay proyecto nacional, no saben que hacer mas alla de comprarse un coche mejor, y segun uno de los textos de arriba, en Japon ya no quieren ni esto. Ambos paises son gigantes economicos pero enanos politicos, totalmente incapaces de liderar ni su futuro ni el de otros. Japon esta totalmente aislado en Asia, encerrado en su torre de marfil, mucho mas ahora con ele mepuje chino. A Alemania se le "tolera" en Europa que nos pague los gastos, pero en cuanto osan ir algo mas alla, como han hecho recientemente los griegos, se les recuerda Auschwitz, y la respuesta alemana es mas bien timida. Son paises sin salida, condenados al placer onanistico de comprar cosas ... para no hacer nada con ellas.
Sin proyecto nacional un pais no es nada, de nada vale tener una montaña de dinero si no quieres hacer nada con esta fortuna.

Iniciado por Serpiente_Plyskeen

Entonces, siguiendo ese razonamiento, ?Que futuro le espera a España?
Edito: Jordi, ?tienes muchos amigos chinos? Porque yo con los que he tratado, a partir de la treintena, tienen proyectos vitales de lo más normal: Quieren coche, vivienda propia (con hipoteca, les da igual), tener hijos... vamos, de lo más standard, desde el punto de vista europeo.
Y no me refiero a chinos que vivan en europa, sino en la república popular.

En cambio, los alemanes que conozco y trato que viven en Irlanda son menos consumistas... tienden a no tener coche, y vivir de una forma más bien sencilla.

Iniciado por NosTrasladamus

Añado que veo muchas similitudes entre los problemas de Japón y los de hispanistan (burbuja inmobiliaria, desequilibro de la balanza de pagos, empresas con deudas, creciente desigualdad en el reparto de la riqueza, población envejecida, clase política corrupta), pero aqui no tenemos ninguna de las fortalezas del país nipón... empresarios responsables, personas sacrificadas y educadas, sector industrial innovador y potentísimo, respeto a la ciencia y a la sabiduría...