To further protect the market, Japan resisted rice imports until the Uruguay Round of global trade talks in 1995, when it agreed to start buying some 682,000 tons of foreign rice a year, mostly from the U.S. But the Japanese government, which controls rice sales, doesn’t sell the imported rice on the market. That is because Japan produces more rice than consumers eat. Fearing that cheap foreign rice would further erode prices, it has been storing the foreign rice for years, amassing a huge stockpile. Some of the reserves have been fed to livestock, fermented to make miso paste, and even given away to North Korea as aid. Still, at the end of 2007, Japan had 2.29 million tons of rice in storage — 1.52 million tons of imported rice and 770,000 tons of domestic rice, which the government says is for use in emergencies.
So because of foreign pressure to open up its rice market, the Japanese government at some point decided to buy rice on foreign markets. But this rice was never allowed onto the Japanese market but instead stored in massive warehouses.
That’s just insane. It’s like an x-files episode or something. According to the article Japan now has 2.6 million tons of rice stored most of it as a result of the above agreement, and might now use it in the following way:
Now, Japan says it is finally considering releasing some of the stock to help ease the global food crunch.
Hm. Okay. I guess that would be useful. Still though, it leaves me scratching my head.
From the Japan Times, an article about consumer protectionism states:
Also attending the meeting were Yuka Murata, 46, whose 7-year-old son suffocated in 2007 after eating “konnyaku” (devil’s-tongue) jelly, and Japan Federation of Bar Associations President Makoto Miyazaki. Murata criticized the government for failing to take swift measures to curb product-related accidents, saying, “An accident caused by (konnyaku) jelly produced by the same maker also occurred 10 years ago.”
There’s no doubt that this is a tragedy. But as someone whose eaten these things and given them to his child, I have to say konnyaku jelly is about as dangerous as mochi, those gooey rice cakes so popular during the New Years holiday. That is you have to be careful when you eat certain foods like this, and you have to watch your children carefully when they eat foods like this.
So while I understand how horrible the parents must feel here about what happened, what are we to do, make mochi and mochi-like desert products something that can only be produced in the black market?
This week-end, even if I live in a third world country with a teetering economy, I can still cut through the jungle with my machete as I make my way to the local rundown movie duplex and catch the latest Indian Jones movie, Indiana Jones and the Kingdom of the Skulls.
However, if I live in the worlds second biggest economy, a country known for its high tech gadgetry, can I see the movie? No. Japan is literally one month behind every other country showing the film. Check it out.
A government panel said Monday the consumption tax rate would have to be raised from the current 5 percent to between 9.5 percent and 18 percent if a fully tax-funded system is employed to finance the basic pension as part of envisaged reforms.
Okay. Let’s think about this. Pension funds are underfunded. Why? Well, aside from the facts that the record-keeping is incredibly inept, the pension calculations were probably poorly done. People are living longer than expected, inflation is increasing the cost of living, etc.
So what’s to be done? Raise the sales tax. But what sense does that make? If you’re a foreigner you might not even be part of the pension program, so why should 15% of the money you spend in Japan have to pay for pension funds?
Moreover, the sales tax hits the poor hardest, but who gets more benefits from the pension program. Right, the rich because they pay more into it. So this is a rob the poor to give to the rich strategy, isn’t it?
This is mind boggling.
Of course, there’s the *conservative* Yomiuri arguing that, gosh we can probably get by with an increase to only 7%. Either way, it sounds like extortion to me.
As I write this it now takes 114.52 yen to purchase a dollar (link).
So let’s ask the question again, are people still unwinding those carry trades?
Japan’s currency also advanced as equity markets came under pressure. Analysts said the resulting rise in risk aversion was accompanied by investors trimming back carry trades. In the carry trade low-yielding currencies such as the yen are sold to finance the purchase of riskier but higher-yielding assets elsewhere. The yen rose 1.4 per cent to Y164.30 against the euro on the week, gained 1.4 per cent to Y235.90 against the pound and climbed more strongly against the high-yielding Australian and New Zealand dollars – 3 per cent to Y103.00 and 4.9 per cent to Y86.60 respectively. Worries that the G7 might take a more forthright stand over the weakness of the yen also gave the Japanese currency a boost, though most analysts thought such fears unfounded. (Financial Times)
Remember, that interest rates (such as those set by central banks) should be reflected already in the value of the currency. So what fuels the carry trade is mostly speculation. Right? So this creates a sort of bubble (though a small localized one), doesn’t it?
The issue is now being regarded as serious enough that the G7 is going to look in on it. I think it goes without saying that the primary reason for the weak yen in the past has been Bank of Japan interventions to keep the yen low (in order to help exports). Has the cheap yen at least playing a bit part in the sub-prime mortgage problems now unfolding in America?
Aside from the fact that this isn’t good, I’m not entirely sure what else it means, but …
Housing starts have fallen precipitously in the last couple of months. Stricter earthquake-proofing regulations and the economy are cited as factors. Here’s the graph from the Asahi:
The number on the right is the housing starts in the tens of thousands. And the number on the left is the percentage change from the previous year.
Note that carry trades should not really exist for any discernible amount of time. Interest weight fluctuations should be reflected in currency values.
So why is the following happening –
Investors have resumed selling yen as part of the so-called carry trade, buying higher-yielding currencies with funds borrowed in Japan, where the benchmark overnight rate is 0.5 percent. This strategy unraveled, causing the yen to rebound from a 4 1/2-year low starting in June, when a sudden global surge in the cost of credit led investors to trim risky bets. (Bloomberg)
I don’t know how this is working, but I do know that if the sub-prime market begins to fall — are any serious trouble hits the American market — there will be a rush for the door to get out again. It’ll be worse than last time and the yen could make it to 100.
However, so far the Fed in America has decided on an inflationary policy, which will allow people who can’t afford to pay for their mortgages to struggle on a bit longer, and will fuel investment (wise or otherwise).
While its impossible to know the timing of events (we’d all be rich if we could), the long term prospects for the yen mostly good. Japan is the world’s biggest creditor, and it’s still running a heck of a trade surplus.
T or F: cheap cell phone rate in Japan is good news.
False, at least apparently not in Japan.
Ever wonder just how big cell phone consumption is in Japan?
It is so big that if major service providers cut prices substantially it will actually cause the price index to significantly move downward.
This means deflation. Is that desirable? Well, people didn’t seem to like it during the great depression, but in some ways it is better than inflation.
I mean, cell phone prices are too high in Japan, aren’t they?
A price war aimed at Japan’s 100m mobile phone users could have a significant impact on the core consumer price index, potentially prolonging the country’s brush with deflation, economists warned on Wednesday … economists said that hefty cuts in mobile service fees could knock as much as 0.6 percentage points off the headline CPI … the Ministry of International Affairs and Communications, which compiles the CPI, must decide how to account for an expected cut in mobile phone charges of up to 30 per cent by KDDI, Japan’s second-biggest mobile phone provider. NTT DoCoMo, Japan’s leading mobile phone company, is expected to follow suit … John Richards, senior strategist at Royal Bank of Scotland in Tokyo, said that, as a worst-case scenario, a 30 per cent cut in fees could lower the CPI index by 0.6 percentage points. Given that the CPI was falling at a rate of 0.1 per cent, the impact would be “huge”, he said.
And I was so excited about cheaper cell phone usuage. Talk about raining on someone’s parade.
