Japan (and its Real-Estate market) Rides Again

The next big theft comes next year when the consumption tax jumps from 5 – 8%. They expect to raise Y8T but then give back Y5T in stimulus. We all know who will get the most benefit from that stimulus package and it won't be Mr &Mrs Tojo

Some how this is being pitched as debt reduction –

Abe takes bold tax step towards cutting debt

Japanese PM vows to unveil five trillion yen stimulus package to cushion the impact of

raised sales tax to slash massive national debt

..and your typical crony transmission method,

Cushioning the tax-increase pain, yesterday's package features public-works spending for the 2020 Tokyo Olympics and tax breaks to promote corporate capital spending. Officials will also consider an early end to a corporate tax add-on that has funded reconstruction following the 2011 earthquake and tsunami, which would save companies 900 billion yen.

By the time you figure it out Ziv they'll have picked your pockets clean. They'll even take the holes.

From your fist link above;

–Japan Sep Avg Wages +0.1% Y/Y, 1st Rise in 3 Months: Aug -0.9

• this is a monthly average and doesn't elaborate on the trend

–Japan Sep Avg Base Wages -0.3% Y/Y, 16th Straight Drop

• base wages are falling on a long term trend.

–Japan Sep Overtime Pay +3.5% Y/Y; 6th Straight Rise; Aug +3.0%

• production is lifting on an expectation of rising consumption taxes

–Japan Sep Special Pay +6.4% Y/Y, 1st Rise in 2 Months; Aug -9.2%

• one offs that usually reflect share price movements etc. It's not clear who gets these payments

–Japan 2013 Summer Bonuses +0.3% Y/Y, 1st Rise in 3 Years

• only 40% actually got a rise

–Japan Sep Total Hours Worked -0.6% Y/Y, 2nd Straight Drop

• shrinking work force??

–Japan Sep Mfg Overtime Worked +7.0% Y/Y, 3rd Straight Rise

–Japan Sep Mfg Overtime Worked +0.4% M/M, 2nd Straight Rise

• tax rise induced lift in production

The trend is down no matter how much you want to try and dress it up. I expect to see unusual rises in production and O/T as consequences of incoming increases in consumption taxes. I mentioned it before that both NZ and AU experienced surges in demand and production prior to the introduction of GST. It simply brings forward consumption and leaves a vacuum behind it for some time after its introduction.

Outside of base wages bonuses do not tell the full story because they are distortionary. The data indicates the magnitude of a rise in bonuses but does not show who or how many got any rise at all. Insurance surveys indicate less than 40% actually got a rise at all. The remainder 11% no change 49% received lower bonuses indicates how the upper exec layers are receiving the bulk of all bonuses while the man in the street continues the steady decline in middle class wealth.

When I read this comment I couldn't help but think how relevant it was to your poor old 99% of Japo's in the street..

"Well, in our country," said Alice, still panting a little, "you'd generally get to somewhere else — if you run very fast for a long time, as we've been doing."

    "A slow sort of country!" said the Queen. "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

Come on Ziv you can do better than that. The idea that the consumer increase in spending is a positive is a stretch. There's lotsa misleading MSM comment around both consumer spending and employment.

Consumer spending has been rising since 09.

Your bigger than normal bump is in anticipation of rising consumption taxes and was spent mostly on luxury goods. That good ol' 1% again spending their Abe bribe  money… The simple fact is if you spend heaps today you can't spend heaps tomorrow. Distortionary spending patterns don't do any long term good for the economy and it's extremely hard on business planning.

• Consumers started buying more after holding back since the global financial crisis that began in 2008, and the earthquake and tsunami disasters of March 2011. Household spending rose in the first four months of the year, gaining 5.2% in March. But a lull followed, with spending falling in three of the four months through August.

So the upshot here is that Sep's bump was on the back of a 4 month lull. The coming tax will probably see continued increases in spending as late spenders get in before the tax increase.

• Because of “rush-to-buy demand” before the sales tax goes up, the spending figures will likely strengthen even further in the coming months, said BNP Paribas Securities chief economist Ryutaro Kono.

While on the face of it all this may sound great. It's not as good as it's being pumped by mass media hype.

• However, many economists say the underlying spending trend remains somewhat weak, due in part to wages not rising.

As I've suggested several times. Japan is likely to see temporary lifts in economic numbers as the BOJ artificially juices the market and fiscal policy influences spending patterns in the short term

The unemployment figures are a joke. Unemployment rose in August to 4.1. Sep they're down to where they started. If you really want to talk about employment we can chat about the 1000's of salary men with the soul destroying window seat, the 10's of 1000's of underemployed who are parked in dead end jobs doing bugger all because companies can't fire them. Japan is as bad as France when it comes to dysfunctional IR laws. If companies could shed life sapping deadwood from their workforces the unemployment rate would be much much higher. Employment data out of Japan is on a par with the junk data out of the US.

Latest Q3 figures don't bode well.

Japanese Q3 Growth Tumbles As Abenomics Cracks Following Slide In Consumption And Exports

Bucket loads of QE and a half gutted currency aren't moving this economy in the right direction.

When you're in a race to the bottom all you get is a pile up.

"Frustrated" Liquidity Addicts Demand Moar From BOJ As Nikkei Rally Stalls, Abenomics Founders And "Hope Fades"

A bigger problem is that suddenly hope is fading: "The chief Asian investment officer at one major global asset manager says foreign investors are getting increasingly “antsy” with the apparent lack of progress. “Personally, I wouldn’t be a major buyer of Japan,” he says. "If you buy now you are still buying on hope."

It's all going so well….. who'd a thunk it… $75B/mth in the worlds 3rd largest economy and QE that makes the FED look half hearted don't seem to be enough to shock this baby into life. Moar on the way I'm guessing.

Get your popcorn this is gonna be one helluva show.

When they print $73B/mth and big brother China prints $203B/mth its gotta go somewhere I suppose.

I don't think anyone thought Abe would not try and enact reform. The doubt comes over how successful any reform would or could be. Ag is the path of least resistance. The Ag sector has no real power and given small farmers are on average over 50 they may be willing to relinquish their hold especially with no willing sons to take over the reins.

Personably I'm not convinced it will make much difference if any at all. At less than 1% of GDP and fading fast how do you make this sector productive and globally competitive? NZ (& AU) is (are) one of the most advanced ag producers in the world yet I see lots of high productive land around major cities sitting idle. When I was a kid I worked on some of these local farms. More than 50% have gone. Many are lifestyle blocks.

Corporatising Japanese farming won't change the economic landscape enough that you'll notice. You get mass produced shelf life specific foods that lack nutritional profiles of their predecessors and less diversification (choice) of varieties. When I was a kid the orchard over the fence grew 10 – 15 different varieties. Lucky if you can find four on the shelves now and they taste like crap by comparison.

Corporatisation will see more mass production of select parts of the ag economy (low hanging fruit), lower employment needs due to efficiencies in mass production and less choice. NOTE: farmers markets are making a comeback in both NZ and AU due to lack of choice and poor quality (species grown for shelf life not taste and table).

As tariff protections are removed you will see imports rise and displace much of what is currently grown locally. This is somewhat of an annoyance in both NZ and AU as supermarket chains import at lower prices and to beat seasonal fluctuations. Indigenous production struggles to hold its ground against cheap imports even here. Japan hasn't got a hope in hell of competing. From an economic point of view Japan will simply pay someone else to grow their food.

One of the biggest down sides to this type of policy if introduced poorly is the destruction of small rural communities and local economies. When the AU govt tried to introduce water management controls to the Murray Darling system after the droughts there was hell to play. The initial policies where substantially modified as a result.

You're unlikely to see any benefit from these so called reforms for a decade or more. Too long to have any real affect on the economy.

Too small a part of the voting public to be a serious threat although it's early days in the reform process yet. I doubt the final outcome will bear little resemblance to the original if things get too tough.