Tuesday, November 13, 2012

Japan's Gross Borrowings and Guarantees Have Passed One Quadrillion Yen.

So much for "That's trillion, with a T".
From the Australian Financial Review:

Japan’s sorry state a lesson for others 

Japan’s sorry state a lesson for others
Consumer prices in Japan have fallen for seven of the past 10 years. Photo: Getty Images

In the universe of financial markets, numbers just keep getting bigger and bigger. I was just getting my head around the actual magnitude of a “trillion” when along comes the “quadrillion” – a thousand trillion.
The winner of the race to have a quadrillion exposure – debt, not assets – is the government of Japan, which now has gross borrowings and guarantees in excess of one quadrillion yen.

In more manageable, conceptual terms, that works out to be about $100,000 for every man, woman and child.

Furthermore, Japan is charging ahead to its next quadrillion of debt. For the past four years, the Japanese government has actually borrowed more to fund its annual budget than it has raised through taxes. A further large deficit is forecast for next fiscal year.

The Japanese government debt amounts to 230 per cent of GDP, the largest in the world.
There was a time, not so long ago, when Japan loomed much larger in terms of the health of the Australian economy than it does now.

These days it’s China we worry about most. Fair enough. China accounts for 29.1 per cent of our exports.
But Japan, still the world’s third largest economy, comes in at No. 2 with a tally of 19.4 per cent.
Consequently, the news that Japan’s economy shrank 0.9 per cent in the July to September quarter from the previous quarter, and is almost certainly slipping back into recession, is a matter of concern.
You can add to that a growing softness in China’s economy, weakening data out of Korea (8.3 per cent of our exports) and a sharpish slowdown in India (5 per cent of our exports).

Our exports to these countries, accounting for 61.8 per cent of all export income, are narrowly based and dominated by iron ore and coal.

Normally you would say the implications these developments had for our terms of trade would impose considerable downward pressure on our exchange rate.

These days, however, our high credit rating and the premium interest rate on offer for our bonds provide a counterbalance to the terms of trade effect....MORE
HT: Phil's Stock World