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Crisis deepens in Japan and China as Asian exports plunge

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    Crisis deepens in Japan and China as Asian exports plunge

    http://www.telegraph.co.uk/finance/c...ts-plunge.html

    Japan's exports plunged 27pc last month in the steepest fall for half a century.

    The shock data came as the Japanese Cabinet Office warned that the world's second biggest economy is now deteriorating at an "exceptionally high pace".

    Shipments collapsed to almost all markets in North America, Europe, and Asia, following a pattern already set in recent days by South Korea, Taiwan, and China. Thailand on Monday said its exports fell 19pc in Novermber.

    It is unclear to whether the violent drop is distorted by a "one-off" inventory shock as companies slash stocks, or whether it is the start of a trade slump that threatens Asia's entire export strategy.

    "We think this is very serious," said Stephen Jen, currency chief at Morgan Stanley. "These export surplus countries are super-leveraged to the West, and now we're seeing a multiplier effect (in reverse) as the intra-Asian trade model is stress-tested. What's incredible is that Japan has run a trade deficit for two months in a row despite the fall in oil prices. The next country to watch is going to be Germany," he said.

    The Baltic Dry Index measuring freight rates for bulk goods has crashed by 94pc since peaking in June. Container shipping for manufactured goods has been less volatile but that too has begun to buckle. Denmark's Maersk and China's COSCO have both cut container rates from Asia by a quarter.

    Importers have been struggling to secure letters of credit, the lubricant of the trading system. Even large banks in Asia have had trouble obtaining dollars needed for shipping deals.

    Masaaki Shirakawa, the Bank of Japan's governor, said the central bank was preparing to buy corporate debt and commercial paper in an emergency move to unlock the credit market. It cut interest rates to 0.01pc on Friday, tantamount to zero.

    "It's an exceptional step," he said, insisting that the authorities were taking on private credit risk with great reluctance. The bank is boosting its purchase of governement bonds from ¥1.2 trillion to ¥1.4 trillion ($156bn) per month in a return to quantitative easing.

    In China, the central bank cut rates for the fifth time since September to 5.31pc and trimmed the reserve requirement for lenders. The Govenrmment is rushing through a $585bn fiscal stimulus package.

    Beijing is alarmed by outbursts of civil unrest, both in the country's hinterland as 9m of migrant workers return after losing their jobs, and in the export hub of Guangdong where violence has been simmering for months. Some 3,600 toy factories have already closed this year.

    Premier Wen Jiabao said over the weekend that the key priority is to find jobs for migrants and some 6m fresh graduates -- the two groups most feared as a political tinderbox. "If you are worried, I am more worried than you," he told students.

    Japan's economy minister Kaoru Yosano said Tokyo is mulling a range of drastic measures to support the economy, including the outright purchase of equities held by banks in distress. "We're ready to do everything we can to break the cycle of deterioration in sentiment," he said.

    The Cabinet Office warned that the surge in the yen against all major currencies was now tightening like vice on Japan's economy. "The tempo of the economic downturn is getting substantially faster, and what's worse there are many negative factors that can make a recession deeper and longer," it said.

    The yen has appreciated by a third to ¥89 against the dollar since the credit crunch began. There has been a dramatic reversal of the "carry trade" as hedge funds close worldwide bets that were financed at near zero rates in Tokyo. Japanese investors began to repratriate their vast foreign holdings. It has doubled in value against sterling.

    The surging yen has played havoc with the balance sheet of Japan's leading exporters. Every one yen appreciation against the dollar and euro shaves Toyota's profits by $450m. The company is now underwater, facing its first loss since 1938.

    The risk is that Japan could slide back into a deflationary crisis and renewed perma-slump. The country's `Lost Decade' never seems to end.

    #2
    Merry Christmas
    First Law of Contracting: Only the strong survive

    Comment


      #3
      Originally posted by BrilloPad View Post
      .. The risk is that Japan could slide back into a deflationary crisis and renewed perma-slump. The country's `Lost Decade' never seems to end.
      What is it with the Japanese and perma-slumps?

      I've heard it said it's because too many of them are obsessive savers. Lucky for us we in the west have more spendthrifts like me.
      Work in the public sector? Read the IR35 FAQ here

      Comment


        #4
        .

        Interesting article and the language used is worrying - comparing Japan to the UK - Japan's economy is/was much more efficient, diversified, and competitive and geared-up to the post-industrial economy - the UK is so reliant on the service sector and is going to get hit with the cost of Null Liebour’s social engineering experiments over the next few years with increased demands on UK infrastructure transport,healthcare,education,housing and social cohesion and without the financial resources to invest. The UK has no post-industrial 'productive' economy of significance, no primary / secondary industries to fall back on. The NullLiebour project can no longer rely on keeping the masses happy with pretend house prices / high employment, and newspeak when they get in for a forth term - they will need a phoney war / massive house building project or subliminal messages in the soap operas to keep the masses happy.

        Comment


          #5
          As predicted. It's lucky our economy is more diversified and post industrial.
          Hard Brexit now!
          #prayfornodeal

          Comment


            #6
            Originally posted by Iron Lung is Rusty View Post
            Interesting article and the language used is worrying - comparing Japan to the UK - Japan's economy is/was much more efficient, diversified, and competitive and geared-up to the post-industrial economy - the UK is so reliant on the service sector .
            Great we have another village idiot on board.
            How is Japan's economy post-industrial, when they rely on exports so much?
            Whatever the merits or otherwise, a post-industrial economy is a service economy, cretin.
            The clue is in the words "post industrial" i.e. not industrial any more.
            Hard Brexit now!
            #prayfornodeal

            Comment


              #7
              Originally posted by sasguru View Post
              Great we have another village idiot on board.
              How is Japan's economy post-industrial, when they rely on exports so much?
              Whatever the merits or otherwise, a post-industrial economy is a service economy, cretin.
              The clue is in the words "post industrial" i.e. not industrial any more.
              Japan has a post-industrial economy because the relative importance of old tech and labour intensive manufacturing has lessened and that of services, information, and research has grown manifesting itself in innovative intellectual products that are exported for a high value return.

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