Comments on: The problem of Japan’s household savings http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traian http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42271 Fri, 03 Aug 2012 11:37:10 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42271 GPIF started buying emerging markets stock, so Mrs Watanabe will have money in something other then bonds.
http://www.bloomberg.com/news/2012-07-25  /world-s-biggest-pension-fund-sells-jgb s-to-cover-payouts.html

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By: JapanFan http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42268 Fri, 03 Aug 2012 05:00:50 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42268 Actually, the yen went above 79 to the dollar in 1995 as well. Gotta check the history better Felix.

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By: MrRFox http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42267 Fri, 03 Aug 2012 04:31:27 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42267 “But it’s the psychology which fascinates me.” (FS)

Me too – your psychology, FS, as reflected in this –

“In the US, everybody’s asking what the Fed can do to support home prices ….”

“Everybody” isn’t asking that, Sir – but you are, and I take it the one then becomes the other, right lad? The Fed created the bubble in house prices, didn’t it? Were you grousing about that while it was happening? I don’t remember it, if you were. Now that the bubble has revealed itself to be what it is/was, you have become part of the Greenspan, Krugman, Angelo Mozilo chorus –

“Bubble Without End – Amen.”

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By: loudnotes http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42256 Thu, 02 Aug 2012 19:02:12 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42256 “It’s now hitting new all-time highs around 78 yen to the dollar”

Actually, the high was 75.82 in October 2011, which triggered another massive intervention that was at least briefly successful earlier this year.

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By: AABender1 http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42251 Thu, 02 Aug 2012 17:47:11 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42251 A debt-to-equity conversion?

Political economy prescriptions should at least incorporate some sense of demographics. For example, Daniel Patrick Moynihan once likened the societal progress of U.S. baby-boomers to a snake eating an elephant and this informed his decisions.

Think about how much U.S. investment preferences, priorities, and politics have morphed over the past 50 years as our society has digested this elephant.

Japan’s demographics are currently diamond-shaped and heading rapidly towards top-heavy. That means that Japan has an overwhelming number of older people and that number is growing every day. (Here is an old, but quick view of population v. age group trends in Japan published by the Japanese themselves: http://warp.ndl.go.jp/info:ndljp/pid/283 520/www.stat.go.jp/english/data/handbook  /img/fig2_3.gif)

So, Japan is a nation of bond holders because it is a nation of elders. And just as U.S. financial advisors suggest to clients that as they age, they should lighten up on their equity allocation in favor of more fixed income allocations, the aging Japanese population has done that same, rational thing and will continue to do so far into the future. (And the Nikkei’s collapse from nearly 39,000 in 1989 to less than 10,000 by the end of the ‘90s certainly helped drive home the downside risk of ignoring that asset allocation advice.)

Add to that the deep respect that elders are accorded in Japanese society, and you can begin to see that this Japanese problem of political economy is as intractable as they come.

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By: AABender1 http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42250 Thu, 02 Aug 2012 17:47:10 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42250 A debt-to-equity conversion?

Political economy prescriptions should at least incorporate some sense of demographics. For example, Daniel Patrick Moynihan once likened the societal progress of U.S. baby-boomers to a snake eating an elephant and this informed his decisions.

Think about how much U.S. investment preferences, priorities, and politics have morphed over the past 50 years as our society has digested this elephant.

Japan’s demographics are currently diamond-shaped and heading rapidly towards top-heavy. That means that Japan has an overwhelming number of older people and that number is growing every day. (Here is an old, but quick view of population v. age group trends in Japan published by the Japanese themselves: http://warp.ndl.go.jp/info:ndljp/pid/283 520/www.stat.go.jp/english/data/handbook  /img/fig2_3.gif)

So, Japan is a nation of bond holders because it is a nation of elders. And just as U.S. financial advisors suggest to clients that as they age, they should lighten up on their equity allocation in favor of more fixed income allocations, the aging Japanese population has done that same, rational thing and will continue to do so far into the future. (And the Nikkei’s collapse from nearly 39,000 in 1989 to less than 10,000 by the end of the ‘90s certainly helped drive home the downside risk of ignoring that asset allocation advice.)

Add to that the deep respect that elders are accorded in Japanese society, and you can begin to see that this Japanese problem of political economy is as intractable as they come.

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By: Strych09 http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42247 Thu, 02 Aug 2012 16:51:10 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42247 Re: “the US is a nation of stock investors. In the US, the daily gyrations of the stock market are reported in every newspaper and on every newscast…”

I’ve never understood why every U.S. newscast must report the daily motion of the Dow Jones, the S&P 500 *AND* the NASDAQ* and sometimes even the Russel 2000, but an investor has to go out of their way to find out what happened to the Barclays Capital U.S Aggregate Bond Index.

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By: urownexperience http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42246 Thu, 02 Aug 2012 16:10:37 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42246 What’s wrong with slow growth and a simplified life? Manic activity bores me.

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By: dWj http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42244 Thu, 02 Aug 2012 16:00:31 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42244 Issuing inflation-linked or foreign-currency denominated debt would presumably help, though those would probably themselves carry political costs, not least insofar as they might signal the possible intention of inflating later.

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By: stheophil http://blogs.reuters.com/felix-salmon/2012/08/02/the-problem-of-japans-household-savings/comment-page-1/#comment-42239 Thu, 02 Aug 2012 15:10:50 +0000 http://blogs.reuters.com/felix-salmon/?p=16795#comment-42239 “if the creditors are national households. They should be excited about growth. But all too often, they end up getting excited about deflation.”

That sounds an awful lot like the German creditor.

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