Japan; a look at the growth strategy of the world's 2nd largest economy

Sep 17 (Reuters) - Japan's new government is crawling out of the worst post-War recession ever, but its ability to spend is growing more limited.

Japan DPJ Election Win Brings ‘Bloodless Revolution’ -- Bloomberg

Aug. 31 (Bloomberg) -- The Democratic Party of Japan swept to power
for the first time as the nation's voters turned their backs on half a
century of single-party government that failed to reverse economic
stagnation and spiraling welfare costs.

The DPJ, led by 62-year-old Yukio Hatoyama, captured at least 306 of
480 lower-house seats, public broadcaster NHK said. Prime Minister
Taro Aso indicated he would resign as head of the Liberal Democratic
Party, which lost almost two-thirds of its lawmakers in a complete
reversal of the last election in 2005.

"This is a bloodless revolution, the first transfer of power from one
party to another in postwar Japan," said Tomoaki Iwai, a political
science professor at Nihon University in Tokyo. "The DPJ now faces the
tough task of delivering on its promises and showing the Japanese
public it can change the system."

Hatoyama, who quit the LDP in 1993, has pledged to revive an economy
emerging from its deepest recession since World War II by boosting
child-care spending, cutting taxes and curtailing the power of
bureaucrats. His grandfather founded the LDP in 1955 and became the
first of that party's 22 prime ministers.

"This election has been all about changing the government," Hatoyama
said in a nationally televised press conference. "Everything starts
now."

...

To acess the full Bloomberg article please visit:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAQ0qltevVQI

--
Sent from my mobile device

Latino Ex-pat workers hit in Japan

[Reuters] -- May 15 - Latino workers in Japan have been offered money by the Japanese government to leave after losing jobs.

Japanese Housewives in control of $14.9 trillion in savings

Japan never ceases to amaze me. When I first traveled to the island I was an angry, impatient New Yorker. I decided to stop over in Japan to visit a old friend of mine on route to Beijing for a semester abroad.

I had no idea what I was getting into. I spoke a bit of Chinese, but no Japanese, and had prepared little else besides a youth hostel in Tokyo for my first week in the country.

I got off the subway at Asukasa, drenched in sweat from some of the worst August humidity I have ever felt in my life—and trust me I have felt bad humidity... The beginning of the Amazon in the province of San Martin, Peru or the swamps of Louisiana do not compare.

After twenty minutes of wandering I was drenched from head to toe in sweat. I walked into a laundry mat and before I could talk three workers quickly helped me inside. They handed me a glass of water, a cold washcloth and offered me a seat.

The workers got on their store computer, found map quest directions and then proceeded to carry my bags for twenty minutes up some intense hills, across ridiculous intersections and all the way to the door of my hostel. They then refused a tip. I did not even know what to say, except, “how do you say thank you in Japanese?”

"Ari-ga-to"

Today, Bloomberg ran a interesting story on the return Yen carry trade, which is when traders in Japan take out cheap loans at Japan's 0.1% interest rate and invest it in higher yielding foreign bonds where the interest rate is higher.

The article talks about the return of “housewives.” Housewives you say? As it turns out, housewives usually manage investing their family savings. Japanese families currently have a incredible $14.9 trillion in savings!

Ron Harui of Bloomberg writes:

“They’re seeking higher returns after the central bank cut its benchmark interest rate to 0.1 percent. Investors who sell the yen against the euro would earn 3.4 percent by year-end, compared with 0.25 percent in one-year yen-denominated deposit accounts, data compiled by Bloomberg show."


Question: If Japan has all this capital sitting on the side lines, would it not be wise to figure out a way to invest a higher portion of it in Japan?

Japan's central bank is essentially stuck in a catch 22. On one side the low interest rate stimulates growth by encouraging lending. However, if the money being lent is invested internationally in foreign bonds that yield a higher rate of return than a Japanese savings account, the true goal maintaining low interest rates is not being achieved.

The way things stand at the moment, Japanese savers are technically helping fund Australia's huge budget deficit through the purchase Australia's higher yielding bonds.

I'm sure the matter is more complicated than my gross simplification. I welcome comments from someone more familiar with Japan's financial sector.