Japanese Deflationary Spiral...

[Kidlicious]

Originally posted by Oerdin
I would think that in nearly all cases the total amount of domestic production would far out weight the amount of incoming foreign capital. Thus you'd want to keep interest rates moderate so as to not kill the real economic engine of the country during your prosuit of foreign funds.

It's a matter of supply and demand. For example, in Thailand they were building real estate that could not possibly be occupied. A market glut occured.

[Az]

So, why can't they just print money to end this supposed problem?

[Kidlicious]

Originally posted by Azazel
So, why can't they just print money to end this supposed problem?

The BOJ has lost the confidence of investors. Investors no longer believe that the BOJ can stop deflation. Therefore, any money that is injected into the system will just be saved.

[Dinner]

Printing money would be inflationary and so it could potentially end the deflationary spiral. If the nation's debt is to be repaid in the currency to be devalued (i.e. over printed) then the problems wouldn't be to bad as long as the currency isn't so over printed as to cause out of control inflation. If, however, the nation's debt has to be repaid in a "hard currency" (as is very common in 3rd world or 2nd world countries so lenders can avoid government's deliberately over printing) then they will find the nation's debt EXPLODING to the point that they can no longer service it. This will cause default and national economic chaos.

Ask our Argentine friends what they think of this.

[Kidlicious]

Originally posted by Oerdin
Printing money would be inflationary and so it could potentially end the deflationary spiral.

Only if the additional cash is spent. That is looking unlikely.

Originally posted by Oerdin
If the nation's debt is to be repaid in the currency to be devalued (i.e. over printed) then the problems wouldn't be to bad as long as the currency isn't so over printed as to cause out of control inflation. If, however, the nation's debt has to be repaid in a "hard currency" (as is very common in 3rd world or 2nd world countries so lenders can avoid government's deliberately over printing) then they will find the nation's debt EXPLODING to the point that they can no longer service it. This will cause default and national economic chaos.

Ask our Argentine friends what they think of this.

That may be true, but if they don't get out of deflation then things will get very bad anyway.

[Dinner]

Originally posted by Kidicious

Only if the additional cash is spent. That is looking unlikely.

If you're not going to circulate it then why print it? If you circulate it then it will have some impact upon inflation.

That may be true, but if they don't get out of deflation then things will get very bad anyway.

True, it is a matter of choicing your poison when you are in such a poor state.

[Kidlicious]

Originally posted by Oerdin
If you're not going to circulate it then why print it? If you circulate it then it will have some impact upon inflation.

It might be too late to change things in Japan, but if it were up to me I would still try even at the risk of causing some price volitility. I wouldn't just let things run their course.

[Drake Tungsten]

IMO, Japan's major problem is that they are still wedded to the devolopmental state model that, while perfect for their decades-long effort to catch up to America economically, is now a hindrance to further economic progress. In an economy as developed as Japan's, there is little use for the massive, government-led expansions into new industrial sectors that the developmental state model excells at. With the major benefit of the devlopmental state system neutered by Japan's sucess, the inefficiencies that plague the system are becoming more and more unbearable.

The Japanese really need to move to a more market-oriented, American-style economy in order to correct the gross inefficiency of their economic system, but I don't see them making the necessary reforms anytime soon. There are countless political, social, and cultural reasons why the Japanese don't want to move to a more laissez-faire system. Bold action is needed to solve Japan's economic woes, but bold action isn't exactly a hallmark of Japanese behavior.

Oh well, at least prices will be cheaper when I move over there (I hope).

[DanS]

Aha, I got Drake and Oerdin mixed. Drake is moving to Japan.

Drake: Are you going for work or other reasons? If work, are you going to be working for an American or Japanese company?

[Colonâ„¢]

Originally posted by DanS
Well, to be fair, sales tax is not that high in most states. Some states don't even have it. In DC it is 5.75%. In Maryland, it is 5%. In Virginia, it is 4.5%. Most people buy a lot of stuff on the internet nowadays, anyway. No sales tax there most of the time.

IIRC around 1% of total consumer expenditures is purchased through the internet. (my memory is very vague on that but I doubt I'd be much more) But I guess that it would indeed not make that much of an impact.

[Drake Tungsten]

Drake: Are you going for work or other reasons? If work, are you going to be working for an American or Japanese company?

I'm heading over mainly to gain Japanese fluency. I'd like to go into policy analysis in the future, focusing on East Asia, so Japanese language skill would be very valuable. I'd like to learn Mandarin as well, but I think its better to work on one completely foreign language at a time.

Anway, I'm going over to Japan as an assistant language teacher on the JET Program. I'll be working for a local school board in Japan, but I haven't found out which one yet. You can extend your contract for up to 3 years, but I'm planning on only staying 2 before I come back to the States for grad school. Hopefully I can get the language down in that amount of time.

[Wraith]

--"Oh well, at least prices will be cheaper when I move over there (I hope)."

Depends where, but if you're in one of the big cities then almost certainly not. About the only things that will be cheaper are manga.

Although, if you can find one of those duty-free export shops you can get some really good bargains on electronics (bring your passport).

Wraith
This signature is 100% handmade

[Drake Tungsten]

Depends where, but if you're in one of the big cities then almost certainly not. About the only things that will be cheaper are manga.

I meant that the prices might be lower relative to past Japanese domestic prices. Prices will still be outrageous, especially moving from a cheap area like Nebraska, but it could be worse. I'm guaranteed an annual salary of 3,600,000 yen, so deflation could be my friend.