Raw Japan
Slices of Japanese business, politics and life
from MacroScope:
It’s the Summer of L-U-V
It's starting to look like the Summer of Love. Two reasons: The recovery is taking on a L-U-V shape globally, and it's going to require huge amounts of love and nurturing to keep growth alive.
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L stands for Europe, where slowness to confront deep damage and write down the remaining $500 billion odd in bad bank debt, mean rebuilding will be protracted and painful.
The United States sports a U, bouncing along bottom right. But its financial giants swallowed harsh medicine early and the U.S. has the flexibility to stage an impressive rebound, if not undone by a fast-rising jobless rate at 9.5 percent and heavily indebted consumers.
V stands for Asia (ex Japan), the surprise region showing resiliency, thanks to its rapid Q4/Q1 inventory workdown and huge infrastructure spend by China.
Like the Summer of Love 41 years ago, it is a drug-fueled affair. G20 governments are peddling $820 billion in stimulus this year, equivalent to 2 percent of GDP. Central bankers are spending even more. The Fed has doubled its balance sheet to $2.04 trillion the past 12 months.
These actions might have cushioned a severe cyclical downturn but the structural adjustment to a world of costlier credit is only just beginning.
Will politicians and central bankers have the wisdom or the stomach to keep the drug supply going long enough to prevent L-U-V from turning into an ugly W?
Spring blossoms or just a break from winter?
It’s official: Japan’s economy shrivelled at a record pace in the first quarter.
Needless to say the 4.0 percent contraction in GDP (an annual rate of 15.2 percent, if you speak American) from January to March was not pretty — especially when you see that the pain has spread from Japan’s big autos and tech factories to the broader economy.
