Author: Richard Katz, The Oriental Economist

Although Japan’s merchandise trade deficit in 2011 — the first since 1963 — is a product of the natural disasters of 2011, it is a harbinger of things to come. Sometime within this decade, Japan is likely to start running chronic trade deficits.

While some economists see this happening within three years, it will probably take somewhat longer. Read more…

Author: Richard Katz, TOE

Japan’s deflation is back and worse than ever. In the October to December quarter the GDP deflator, the broadest measure of price declines, fell by 2.8 per cent from a year ago—nearly twice as bad as any previous decline. Yet like his predecessors, Finance Minister Naoto Kan has put the onus on the Bank of Japan to fix the problem by itself. He talks as if deflation were the root cause of Japan’s long economic stagnation, and as if the central bank had a magic wand called ‘inflation targeting.’

Unfortunately, inflation targeting won’t work in Japan. The main cause of deflation is not insufficient monetary stimulus but weak demand in the real economy. Read more…

Author: Richard Katz

Like the Hindu god Shiva, Ichiro Ozawa is both creator and destroyer. Currently the Secretary-General of the Democratic Party of Japan (DPJ), he has a history of building up parties or coalitions and then tearing them down, either by switching sides or inadvertently over-reaching. Some in the DPJ fear that he could do this again due to the corruption scandal for which three of his aides were indicted on February 4.

No one doubts that Ozawa’s recruitment of attractive candidates and campaign tactics were indispensable to the landslide proportions of the DPJ’s Lower House victory in August. And yet, the corruption scandal threatens to snatch defeat from the jaws of victory in this July’s crucial Upper House elections. Read more…