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We have been traveling in Japan for past 4 weeks (another 2 weeks to go). Talking to regular folks, there seems to be divergence between what regular folks thin

by akg_67 12y ago

We have been traveling in Japan for past 4 weeks (another 2 weeks to go). Talking to regular folks, there seems to be divergence between what regular folks thinks need to be done compared to government. The regular folks want to see Dollar-Yen parity. As Yen drops, things become more expensive and regular folks cut back more on spending. I am not sure why increasing cost of imports doesn't show up as inflation. Things would have been worse if not for drop in oil prices (major import for Japan). These folks don't believe dropping Yen is the solution as majority of investment by Japanese companies is outside Japan and weaker Yen just reduces that investment, in turn less profit flow back in the country. The expectation of deflation is deeply rooted in regular folks. Everyone is waiting to spend on large items, just not right now. Land prices are falling so no one wants to buy a house now. We were interested in buying a place in Sapporo but everyone told us to wait until we really need to buy. An apartment costing $200-300K rents for $500-700/mo in Sapporo compared to similar place in Seattle renting for $1,000+/mo. One of our friend mentioned that they just sold their house in Sapporo and had to offer healthy discount to the buyer. I don't have a solution to Japan's problems. But QE, weaker Yen, and raising taxes doesn't appear to be the solution. Rolling back tax increases may be a start in the right direction. Regular folks seems to have better pulse on the problem than establishments.

azernik 12y ago
> These folks don't believe dropping Yen is the solution as majority of investment by Japanese companies is outside Japan and weaker Yen just reduces that investment, in turn less profit flow back in the country. The more expected result would be a change of investment patterns so that more is invested inside Japan; investments abroad bring back only a relatively small amount of money back into the domestic economy and spread over a long period of time, as opposed to domestic investment which generally involves spending in the local economy and increased aggregate demand. > The expectation of deflation is deeply rooted in regular folks. Everyone is waiting to spend on large items, just not right now. And this is exactly why some inflation (caused by QE and a falling yen) would be a good thing - delays in consumer spending are a classic pitfall of deflation. This doesn't sound like an issue of the average Japanese citizen knowing less than the establishment or vice versa, but of individuals making rational economic decisions are good for them, but bad for the economy as a whole. (BTW, I agree with you on the VAT increase, which sounds like the exact wrong thing to do to get out of this low-growth, deflationary trap Japan has been in for so long.)
- ekianjo 12y ago
  > And this is exactly why some inflation (caused by QE and a falling yen) would be a good thing - delays in consumer spending are a classic pitfall of deflation. What do you mean by "delay in consumer spending" ? Oh, you mean like in the US when people buy everything at credit so that they don't have to wait, and have zero savings and huge debts as they go ? Is that the model you recommend ? > This doesn't sound like an issue of the average Japanese citizen knowing less than the establishment or vice versa, but of individuals making rational economic decisions are good for them, but bad for the economy as a whole. You fail to incorporate the bad decisions from the japanese government which are bad for the economy as a whole. As if it were JUST the fault of dumb people. Yeah, elites know much better :D
  - bildung 12y ago
    > What do you mean by "delay in consumer spending" ? Oh, you mean like in the US when people buy everything at credit so that they don't have to wait, and have zero savings and huge debts as they go ? Is that the model you recommend ? In the context of macro economics, delay in consumer spending actually means just that: They'll spend money later. You fancy a new car, but actually your current one still runs fine? You'll delay your spending and just drive your current car a year longer.
    - ekianjo 12y ago
      That does not mean it hurts the economy as a whole. Capitalism never predicts that growth should be skyrocketing every single year. When there are reasons for the consumption to decrease, it does and that's when new market opportunities arise for companies to grab new consumers, either by providing more affordable products, competing on features, or providing new payment options to make easier for consumers to scale their purchases.
      - bildung 12y ago
        > That does not mean it hurts the economy as a whole. The only way for that not to hurt the economy would be finding a way to persuade the consumer to put all the money saved by delaying this specific consumption into goods that cannot be delayed. If I just saved $10k by not buying a new car, you won't be able to persuade me to buy a motorcycle instead, as that buy would be delayable in the same way.

by akg_67 12y ago

azernik 12y ago

> These folks don't believe dropping Yen is the solution as majority of investment by Japanese companies is outside Japan and weaker Yen just reduces that investment, in turn less profit flow back in the country. The more expected result would be a change of investment patterns so that more is invested inside Japan; investments abroad bring back only a relatively small amount of money back into the domestic economy and spread over a long period of time, as opposed to domestic investment which generally involves spending in the local economy and increased aggregate demand. > The expectation of deflation is deeply rooted in regular folks. Everyone is waiting to spend on large items, just not right now. And this is exactly why some inflation (caused by QE and a falling yen) would be a good thing - delays in consumer spending are a classic pitfall of deflation. This doesn't sound like an issue of the average Japanese citizen knowing less than the establishment or vice versa, but of individuals making rational economic decisions are good for them, but bad for the economy as a whole. (BTW, I agree with you on the VAT increase, which sounds like the exact wrong thing to do to get out of this low-growth, deflationary trap Japan has been in for so long.)

ekianjo 12y ago
> And this is exactly why some inflation (caused by QE and a falling yen) would be a good thing - delays in consumer spending are a classic pitfall of deflation. What do you mean by "delay in consumer spending" ? Oh, you mean like in the US when people buy everything at credit so that they don't have to wait, and have zero savings and huge debts as they go ? Is that the model you recommend ? > This doesn't sound like an issue of the average Japanese citizen knowing less than the establishment or vice versa, but of individuals making rational economic decisions are good for them, but bad for the economy as a whole. You fail to incorporate the bad decisions from the japanese government which are bad for the economy as a whole. As if it were JUST the fault of dumb people. Yeah, elites know much better :D
- bildung 12y ago
  > What do you mean by "delay in consumer spending" ? Oh, you mean like in the US when people buy everything at credit so that they don't have to wait, and have zero savings and huge debts as they go ? Is that the model you recommend ? In the context of macro economics, delay in consumer spending actually means just that: They'll spend money later. You fancy a new car, but actually your current one still runs fine? You'll delay your spending and just drive your current car a year longer.
  - ekianjo 12y ago
    That does not mean it hurts the economy as a whole. Capitalism never predicts that growth should be skyrocketing every single year. When there are reasons for the consumption to decrease, it does and that's when new market opportunities arise for companies to grab new consumers, either by providing more affordable products, competing on features, or providing new payment options to make easier for consumers to scale their purchases.
    - bildung 12y ago
      > That does not mean it hurts the economy as a whole. The only way for that not to hurt the economy would be finding a way to persuade the consumer to put all the money saved by delaying this specific consumption into goods that cannot be delayed. If I just saved $10k by not buying a new car, you won't be able to persuade me to buy a motorcycle instead, as that buy would be delayable in the same way.