MacroScope

Mixed reaction from major European banks to appointment of Naoto Kan as new Japanese finance minister. ING is pretty scathing, saying the appointment sidesteps a process of change Japan must undertake to avoid further stagnation or a fate far worse.

“PM Hatoyama has appointed someone with no experience in economic management… Mr. Kan takes on the finance minister role without a well documented, deeply considered policy agenda. Here we rely on reports of positions he has taken in the Cabinet, and from public statements on economic management. These suggest his instincts are to pursue a stimulus strategy involving higher government spending; a weaker yen and ultra-loose monetary policy. Mr. Kan appears tone deaf to microeconomic reform or to the threats to financial stability posed by high public debt.”

The implication, ING says, confirms its worries about Japanese government bonds.

Kan’s first big foray onto the stage in his new role, meanwhile, was to talk down the yen. He said many Japanese firms were in favour of dollar/yen around 95 yen, which is a weaker rate for the yen than recently. Barclays Capital found something positive in this.

“His comments may mark a shift of Japanese FX policy towards weakening the JPY, in our view. Such a stance seems to be appropriate for Japan, considering the weak growth prospects, particularly in the first half of 2010, which will see less economic stimulus measures and, therefore, a strong need for exports to push up the whole economy.”

An interesting post on ING’s new eZonomics blog points the reader to a new study on older workers and health.  The findings — as reported in The Lancet — don’t at first glance look terribly surprising:

A poor work environment and health complaints before retirement were associated with a steeper yearly increase in the prevalence of suboptimum health while still in work, and a greater retirement-related improvement; however, people with a combination of high occupational grade, low demands, and high satisfaction at work showed no such retirement-related improvement.

In simple terms, this is saying that if a worker is happy, their health is better. Anyone who has ever had a bad job could have told them that! But the study, of course takes it further.

MacroScope is pleased to post the following from guest blogger Ian Bright. Bright is senior economist at ING and winner of the 2008 Rybczynski Prize from the UK Society of Business Economists. He says here that bank lending’s future can be seen in Japan’s past — and it is not good for the would-be borrower. 

“There is anger in many countries that banks are not lending money. Or more correctly, they are lending less than people want.

There is nothing new in this. Even before the failure of Lehman Brothers and the collapse of the global financial system, banks were tightening lending criteria. We even saw people who paid off their credit cards each month have them withdrawn. Small companies found that the criteria used to value the assets backing loans were made more onerous.

The Dutch investment bank ING reckons talk of Americans rediscovering savings is misleading.

Households are slashing their purchases of financial assets. The savings ratio is rising because borrowing is falling even more rapidly.   The household savings ratio climbed to 6.9 percent in May, up from a low point of 0.4 percent in 2005. But their purchases of financial assets plunged to -0.5 percent of income in the first quarter (the most recent data), down from a recent peak of 21.6 percent in 2004.

Given this, it will be more than interesting to see the second quarter figures, which should reflect most of the March to June global equity rally. But until then, what do you think? Is the “Americans are saving” mantra misleading?