The Great Debate UK

from Nicholas Wapshott:

Nothing pacific about it: Japan pushes back on China

Members of Japan's Self-Defence Forces' airborne troops stand at attention during the annual SDF troop review ceremony at Asaka Base in Asaka

China is on the march. Or, to be precise, China has made a strong push, militarily and otherwise, into seas nearby, setting off alarms among its neighbors. Now Japan has pushed back, announcing it will “reinterpret” its pacifist constitution so it can be more militarily aggressive in responding to China’s persistent territorial expansionism.

Japan’s actions, however, have also raised alarms. A century ago, Japan set out on a destructive path of conquest, and many still remember firsthand the brutality with which Japanese troops occupied the region -- from Korea and the Philippines, through Manchuria and China, Vietnam and Thailand, all the way to Singapore. Though China is now threatening peace, the memory of Japan’s savage adventurism adds to the general unease.

If Japan’s prime minister, Shinzo Abe, is to persuade countries nearby that his intentions are honorable, there are actions he can take to show that Tokyo has learned the lessons of the past and truly reformed. If he does not, his latest political maneuver is likely to set his neighbors’ nerves on edge, adding to the prospect of warfare between two or more of the nations on the East and South China Seas.

Japan's PM Abe looks at a prompter as he speaks during a news conference to wrap up the ASEAN-Japan Commemorative Summit Meeting at his official residence in TokyoYou may have seen the photo of Chinese vessels pouring thousands of tons of sand onto a reef in the Scarborough Shoal in the South China Sea. It is perhaps the most startling evidence of how aggressively China is pursuing the resources it needs to maintain its extraordinary rate of economic growth. The creation of a new island out of a coral reef, on which it can build a strategically important air strip, shows how determined Beijing is to grab the land and raw materials it feels entitled to, whatever international law may say.

from Anatole Kaletsky:

Japan as the crisis next time

Which major economy is most likely to disappoint expectations this year, and perhaps even cause a financial crisis big enough to break the momentum of global economic recovery? The usual suspects are China and southern Europe. But in my view the most likely culprit will be Japan.

While Japan no longer attracts much attention these days, it is still the world’s third-largest economy, with a gross domestic product equal to France, Italy, Spain, and Portugal combined. Its industries still pose the main competitive challenge to U.S., European and Korean manufacturers, and its regional weight is still sufficient to trigger financial crises across the whole of Asia -- as it did in 1997.

The QE billions should go direct to consumers

Photo

By Mark Hillary. The opinions expressed are his own.

In 1998, the Japanese government was ridiculed for giving away almost $6bn (at 1998 value) of shopping vouchers. The plan was that consumers would spend more of this ‘free money’ and help lift Japan out of the seemingly endless malaise it suffered in the nineties – as many other developed economies were enjoying a roaring decade.

One of the major faults in the Japanese plan was that the vouchers could easily replace the need to spend actual money. If my groceries cost me $100 then why would I still spend $100 of cash on groceries and buy a nice meal in a restaurant with my voucher, when I could just use the voucher for those groceries?

What message is the CDS market sending us?

By Laurence Copeland. The opinions expressed are his own.

Not many people seem to have noticed, but something almost unthinkable has happened in the Credit Default Swap (CDS) market recently. It is now one point cheaper to insure against a default by Her Majesty’s Government than by the Federal Republic of Germany. Given that only a few months ago, Markit was quoting twice as much to insure against a default on gilts as on bunds, this is a major change – but what is it telling us?

The message is unclear, but my guess is it is not quite the one which Britain’s Chancellor, quite reasonably from his point of view, would have us believe. Yes, the market has faith in our ability and willingness to repay – but that is far from the whole story.

from Breakingviews:

Japan’s widow-maker bond trade still looks lethal

By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

TOKYO -- Bond traders have been betting against Japanese government debt for years -- and losing spectacularly. Victims of the so-called "widow-maker" trade of shorting JGBs thought the March disaster would vindicate them. Rebuilding, after all, will add to Japan's sky-high debt and, with a shrinking workforce and rising pension costs, push yields up. But the quake hasn't disrupted the self-perpetuating money machine that drives JGBs. Doomsayers still run the risk of becoming road kill.

from Global News Journal:

Hope and Fear at the World Bank

It was early March and Kristalina Georgieva, the European Commissioner of International Cooperation Humanitarian Aid and Crisis Response, was traveling in Asia. Her plan was to attend a 7.5 magnitude earthquake simulation that would hit Indonesia and generate a tsunami. A few things, however, changed in her itinerary: The destination turned out to be Japan, the earthquake was 9.0 and it not only generated a huge tsunami, but also a nuclear catastrophe. Plus, it was real.

“Usually our fears are bigger than reality. In this case our reality was worse than our fears,” Georgieva said recently at a World Bank panel on the climate, food and financial crises the world is facing today and the way they all intertwine. Georgieva’s strong Slavic optimism brightened the gloomy panel, but the data she threw in didn’t back up her positive view:

from Reuters Investigates:

Japanese quake cost bad, but far from the worst

By Ben Berkowitz

INSURANCE/JAPANThe March 11 Great Tohoku Earthquake in Japan was a tragic disaster of historic proportions -- but from a purely financial standpoint it pales in comparison. (For a special report on insurers, click here.)

Estimates are still coming in but it seems likely the quake will end up ranking as the costliest of the last generation in insured losses, surpassing even the Northridge earthquake that struck southern California in 1994. (The one that collapsed a number of major freeways, by way of reference).

The safest form of power: Everything in moderation

By Morven McCulloch

The ongoing crisis at the Fukushima Daiichi nuclear plant in north-eastern Japan, seriously damaged by a March 11 earthquake and tsunami, has led to anti-nuclear protests in several countries and forced governments to rethink their energy policies.

The UK currently has 10 nuclear power stations, representing 18 percent of the country’s energy supply according to Energy UK. Should British Prime Minister David Cameron, like German Chancellor Angela Merkel, reverse his position on the safety of nuclear power?

from Reuters Investigates:

Is a 10 percent chance of disaster too high for a nuclear power station?

JAPAN-QUAKE/Kevin Krolicki has another alarming special report from Japan today challenging the assertion that the disaster facing Fukushima Daiichi nuclear plant was beyond expections.

The report quotes Tokyo Electric's own researchers who did a study in 2007 on the risk of tsunamis: 

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