Asia Sentinel

“A Once in a Century Recession” – Taro Aso

In the three months since Prime Minister Taro Aso took over the helm of the Japanese government, both the economy and his Liberal Democratic Party’s election prospects have deteriorated in tandem, forcing him to postpone the widely expected general election. The economic crisis has thrown virtually all fiscal restraint out of the window, with new spending supported by bonds and adding to the country’s huge national debt, which now stands at more than 180 percent of gross domestic product, by far the highest in the industrialized world.  By contrast, the US's much more publicized national debt is about 65 percent of GDP.

Just how serious things are getting came home to many Japanese in late December when Toyota Motor Corp, announced it would suffer its first operating loss since the company was founded just before World War II. Toyota is in some ways the flagship and symbol of Japan Inc., and its difficulties are already being described as the “Toyota Shock”.

Of course, the global depression in the automobile industry is hardly limited to Toyota, and the company is not running out of cash, like the American giants that successfully lobbied Congress for bridge loans. But the Honda Motor Company, too, saw its profits tumble and announced it was pulling out of Formula One racing to save money.

The Diet (parliament) convened on January 5, just after the traditional New Year holiday, an unusually early sitting, to consider the passage of the Second Supplementary Budget for fiscal 2008 and the regular 2009 fiscal budget, both of which include multi-trillion yen spending proposals and tax cuts to stimulate Japan’s economy.

It’s is questionable if the spending will be directed effectively. Starting from 1990, when Japan’s economy first collapsed, successive governments have mainly responded by pouring vast amounts of money into the corruption-ridden construction industry, in which tender bids are regularly rigged and planning concessions are given out without regard to existing regulations. Japan is famously overbuilt, with massive spending on bridges to nowhere and airports without cities.

The prime minister tried to put a cheerful face on the economic situation with his first post-holiday remarks: “The future is bright,” Aso said. That contrasted with the brutally realistic assessment of Toyota President Katsuaki Watanabe: “It is a kind of emergency we haven’t experienced before.”

To confront what Aso himself, in a more serious moment, calls a “once in a century recession” the government has tabled a ¥77 trillion ($830 billion) stimulus program of tax cuts, housing loans and direct spending, which by some accounts equals about 2 percent of the nation’s gross national product. It compares with those bruited in the US and announced in China.

In a separate action in December the Bank of Japan lowered its benchmark interest rate to .01 percent. The action followed the Federal Reserve’s motion to cut rates to near zero, Like the Fed, the Bank of Japan has also promised to pump more liquidity into the market, perhaps by buying corporate bonds or even by propping up the stock market.

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Modern Shanty Towns in the Sacremento the Capitol of California
written by MacroMouse , March 09, 2009

These are disturbing pictures of what is happening in the U.S. right now -

http://www.capitalismgonewild.com/2009/03/tent-city-in-sacramento-capital-of-hard.html

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written by papatekusa , January 21, 2009

With the financia crisis go up. Japan's auto industy had a big bolw

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Sinking Autos
written by Aso , January 19, 2009

If the Yanks run out of cash, the Japs will need to have a free one to one car replacement remedy to save the auto industry.

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