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from Breakingviews:
Blame Japan’s debt on companies, not the state
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Japan’s government is up to its neck in debt. That, however, is not because the government has been overly profligate, but because Japanese companies have been deleveraging for a long time. If Prime Minister Shinzo Abe’s policies revive private investment, the government’s track record suggests it will tighten its belt.
In any economy, if the private sector increases savings, the government must borrow, or the current account surplus must widen. In Japan’s case, deflation has prompted companies to cut back on new investment, while the state has picked up the slack. Between 1998 and 2012, Japan’s corporate sector saved 373 trillion yen ($3.6 trillion, at current exchange rates). Over the same period, the government accumulated a 446 trillion yen deficit. The difference between the two — the extra fiscal support for the economy — has thus been just 73 trillion yen, or 1 percent of annual GDP over 15 years. That hardly smacks of budgetary recklessness.
If Abenomics succeeds in boosting corporate investment, then, the government will have to force itself to live within its means. History suggests both are possible. The quarterly pace of fixed investment by Japanese companies jumped 16 percent between end-2003 and end-2007. Over the same period, the government pruned the deficit with the help of a 28 percent reduction in public works spending.
from Global Investing:
Turkey: investment grade, peace and FDI?
Turkey's elevation to investment grade last week may or may not be a game changer for its stock and bond markets, but the country is really hoping for a boost to FDI - bricks-and-mortar foreign direct investment into manufacturing or power generation. Its peace process with Kurdish separatists should help.
Speaking last week at Mitsubishi-UFJ's annual Turkey conference, Finance Minister Mehmet Simsek cited data showing an average 2 percentage-point pick-up in FDI in the two years immediately after a country moves into investment grade.
from MacroScope:
Letter of the Lew: Treasury comments on change of guard at troubled IRS
Here are comments from a U.S. Treasury official on Secretary Jack Lew’s meeting with incoming Acting IRS Commissioner Daniel Werfel this morning, following a scandal of political targeting that cost the previous acting commissioner his job. Treasury officials knew about the problem as early as last June, according to this report in the Wall Street Journal:
Secretary Lew met with incoming Acting IRS Commissioner Werfel this morning and directed him to conduct a thorough review of the organization in an effort to restore public confidence in the IRS and ensure the organization is providing excellent and unbiased service to the taxpayer. Secretary Lew also requested that he take actions immediately as appropriate, and that within the next 30 days, Werfel report back to the President and him about progress made in three areas: 1) ensuring staff that acted inappropriately are held accountable 2) examine and correct any failures in the system that allowed this behavior to happen and 3) take a forward-looking systemic view at the agency’s organization.
from Breakingviews:
Rest of world wishes for Australia’s economic woes
By Antony Currie
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Listening to the Australians, you could be forgiven for thinking their economy is dead in the water - or about to be. The land Down Under has its problems, including a China-driven commodities downturn and an A$18 billion deficit ($17.9 billion) in this week’s budget announcement from Treasurer Wayne Swan, months after he projected a surplus. But the economy, now in its 22nd year of unbroken economic growth, still boasts the stability other countries only dream of.
from Felix Salmon:
Have we solved our fiscal problems?
Ezra Klein has a good summary of the latest CBO budget projections, which show that the national debt really isn't going to be a problem at any point in the foreseeable future. The deficit isn't going away, of course: the smallest it's likely to get, according to the CBO, is $378 billion, or 2.1% of GDP, in 2015. But that's entirely manageable, and puts the national debt-to-GDP ratio on a pretty flat trajectory over the medium term.
Of course, in the real world, none of this is actually going to happen as forecast. It's hard enough to forecast what's going to happen in 2013, let alone what's going to happen in 2023: the CBO projection for this year's deficit has fallen from $845 billion to $642 billion just in the past three months, so it's worth taking all future forecasts with a large pinch of salt -- especially since the one thing that's certain is that there will be substantial changes to US fiscal policy between now and 2023.
from Unstructured Finance:
NJ Governor Chris Christie spotted outside Goldman Sachs
New Jersey Governor Chris Christie shakes hands with Lloyd Blankfein lookalike outside Goldman Sachs on Wednesday
Editor's note: Updated with reason for Christie's visit.
These days it seems New Jersey Governor Chris Christie is everywhere, from TV talk shows and radio appearances to accompanying Prince Harry on a well-publicized tour of the devastated Jersey Shore. So maybe it’s not too surprising he was spotted outside of Goldman Sachs’s Lower Manhattan office Wednesday morning.
from Breakingviews:
Abenomics pulls Japan from its post-Lehman slump
By Andy Mukherjee
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
Prime Minister Shinzo Abe’s policies have beaten back the Japanese economy’s post-Lehman blues. Breakingviews' Abenomics Index was at its highest level in March since September 2008. And that was before the Bank of Japan launched its bold money-printing pledge.
from Anatole Kaletsky:
Renewed optimism can be a double-edged sword
This is a critical week for the world economy and financial markets, especially in the United States. Friday’s U.S. employment report will signal either a renewal of the economic recovery or, much more likely, will confirm that the economy is sinking into another seasonal “soft patch” for the fourth time in four years. Despite this risk, stock prices on Wall Street are at record highs, suggesting that equity investors see this slowdown as nothing more than a temporary obstruction on the way to a sustained recovery, just as in the summers of 2010, 2011 and 2012. So should we prepare for more anxiety about a double-dip recession, or can we feel confident that this summer will be followed by an autumn of strong recovery, as in the past four years?
I had an excellent vantage point this week from which to assess this question: the global conference of the Milken Institute in California, which brings together 1,000 business executives, politicians and financiers in a U.S. equivalent of the Davos economic forum, transplanted to the warmer and even plusher surroundings of Beverly Hills. Clearly, there was anxiety about the flagging recovery and the self-inflected damage caused by January’s payroll tax hike and the unplanned cuts to public spending caused by the sequestration process. But there was also a palpable resurgence of optimism about America’s long term prospects: the opportunities created by 3 billion new global consumers; the U.S. track record of innovation and enterprise; the magnetism of U.S. universities for global talent; the promise of energy independence; the transformational opportunities from “big data” and robotics; the prospect of liberalized immigration policies; and, encompassing many of these issues, a sense that the hyperpartisan warfare in Washington over healthcare, taxes and public spending had reached a point of exhaustion. Both sides, it seems, might be ready for a ceasefire, if not yet a lasting peace.
from Photographers Blog:
Only human: A photographic look at the Bush presidency
Washington D.C.
By Stelios Varias
In the eight years that George W. Bush served as the 43rd U.S. president, Reuters’ photographers were witness to big events and the daily grind that is full-time presidential coverage. Along the way, they amassed a collection of truly memorable images. As their longtime colleague and picture editor, it has been my pleasure to see their images come across the Reuters’ wire and land on the fronts of newspapers and online home pages.
With the Bush presidential center scheduled to be dedicated in Dallas on April 25, I've assembled a few of my favorites from our photographers.
from MacroScope:
Central bank independence is a bit like marriage: Israel’s Fischer
For Bank of Israel governor Stanley Fischer, this week’s high-powered macroeconomics conference at the International Monetary Fund was a homecoming of sorts. After all, he was the IMF’s first deputy managing director from 1994 to 2001. The familiar nature of his surroundings may have helped inspire Fischer to use a household analogy to describe the vaunted but often ethereal principle of central bank independence.
Fischer, a vice chairman at Citigroup between 2002 and 2005, sought to answer a question posed by conference organizers: If central banks are in charge of monetary policy, financial supervision and macroprudential policy, should we rethink central bank independence? His take: “The answer is yes.”
