Tuesday, March 13, 2012

482 Eamonn Fingleton refutes the claim that that the Japanese government's finances are "out of control"

Eamonn Fingleton refutes the claim that that the Japanese government's
finances are "out of control"

(1) Eamonn Fingleton refutes the claim that that the Japanese
government's finances are "out of control"
(2) The Myth of Japan's Failure, by Eamonn Fingleton
(3) Manufacturing and the Limits of Comparative Advantage - Ralph
Gomory, former director of research at IBM
(4) Japan's Current Account Surplus plummets to around $2 billion, a
result of Fukushima and high yen
(5) Bank of Japan spent around $140 billion buying foreign currency to
stop the yen rising in 2011
(6) Reaching Asia's 'final frontier' / Japan steps up efforts to crack
untapped Myanmar market

(1) Eamonn Fingleton refutes the claim that that the Japanese
government's finances are "out of control"

{forwarded} From: Eamonn Fingleton <efingleton@gmail.com>

Dear Friends and Colleagues:

You might like to be aware that I have posted a reply to Paul Krugman's
critique of my recent article on the myth of Japan's "lost decades."

Separately I would like briefly to address the single most common
counterargument to my analysis -- that the Japanese government's
finances are "out of control." To his credit, Krugman does not make this
argument. He understands that there are two sides to a balance sheet. He
has also learned -- the hard way unfortunately -- that much of what the
American press writes about Japan is nonsense. The truth is that the
Japanese government's finances are so strong that the Ministry of
Finance is the de facto lender of last resort to the world financial
system. This was made explicit in 2009 when the MOF advanced $100
billion to prop up the International Monetary Fund. The MOF, in various
guises, continues to prop up several sovereign governments, not least
the United States but also the UK, France, and Italy, among many others.
Reports of the Japanese government's bankruptcy fail to mention that the
MOF has lately been borrowing 10-year money at less than 1 percent. The
only debtor that borrows for less is the government of Switzerland.

For my reply to Krugman, see below. I also include a link to the
original article and, for good measure, a link to an article by Ralph
Gomory that sheds useful light on the "don't worry be happy" trade views
that Krugman seems to espouse.

All the best,
Eamonn Fingleton


A Reply to Paul Krugman

Posted on January 19, 2012 by Eamonn Fingleton

It is past time Paul Krugman visited "basket case" Japan.

I have been under the weather these last few days, hence my delay in
replying to Paul Krugman's critique of my recent article on Japan's lost

He writes: "Fingleton is right in this: the data don't match the picture
of relentless decline that is so widely held." That is putting mildly
but it is certainly better than the "basket case" view that has for so
long been espoused at even the most intelligent levels of American society.

He still needs convincing that Japan has done better than the United
States and provides a chart suggesting that, measured in real GDP per
working-age person, the conventional wisdom holds. Fine. But, as he well
knows, there are countless hidden and quite controversial assumptions in
such a comparison. Given the rise of services as a proportion of GDP,
not to mention the conundrums involved in accounting for qualitative
improvements in electronic gadgetry, the inherent measurement problems
are far greater these days than in former times when economic output
consisted largely of fungible, easily countable items such as tons of
coal and bushels of wheat. Moreover even with the best will in the
world, the problems are compounded where we are trying to make
comparisons between nations so fundamentally different as the United
States and Japan. In any case there are differing political agendas: in
the US there is a strong imperative to make the numbers look as good as
possible. By contrast the key agencies of Japanese power, the Ministry
of Finance and the METI, are trying to talk the yen down and keep
Western trade negotiators at bay. The lower Japan's economic profile,
the better, from their point of view.

For me by far the most problematic statement in Krugman's commentary is
this: "Current account surpluses aren't necessarily a sign of success."
An ivory tower economist can, I suppose, imagine circumstances in which
rising surpluses might be considered a sign of weakness and deficits a
sign of strength — but such circumstances are temporary blips and don't
apply to a Japanese trade policy that, except for a break in the early
1940s, has been consistently pursued for 140 years now. Krugman seems to
forget that the soubriquet "Juggernaut Japan" was coined in the 1980s
precisely because Japan was so successful in boosting its trade
surpluses. (Reality note: Unlike some other commentators, Krugman to his
credit does not cite last year's decline in Japan's surplus as evidence
of a fundamental change. There are several things going on in the
decline, of which the earthquake, the tsunami, the nuclear meltdown, the
power shutdowns, and the Thai floods are only the most obvious. A key
reason why Japan's merchandise trade is lower than formerly is because
of massive transfer pricing — a point that The Economist missed in a
recent analysis.)

In incurring deficits, the United States has been going ever deeper into
debt to other nations. In earning surpluses, Japan by contrast has been
acquiring ever larger assets abroad, not least in the United States.
This is ultimately a matter of national security: debtor nations
increasingly must defer to creditor nations. Even if this is not fully
appreciated in the West, it has been central to Japanese policy thinking
since at least as far back as the 1870s. It was also well understood by
President John Kennedy, who said the two things he feared most were
nuclear war and trade deficits.

The striking contrast in trade performance — with Japan increasing its
current account surplus more than threefold while the United States
increased its current account deficit nearly five-fold in the two
decades — is a development of literally pivotal historic significance.

Evidently overlooked by Krugman, the world has experienced the fastest
and most astounding industrial revolution in history in the last two
decades. The world total of cellphone subscriptions alone has rocketed
from 12 million in 1990 to 4.6 billion in 2010. And Japan — a nation
whose economy turns much of U.S. free-market ideology on its head — has
led virtually every aspect of the revolution. That is because it
dominates the upper reaches of the world supply in most of the
producers' goods involved, not least the key components in cellphones.

Japan's manufacturing leadership is obvious in the fact that its exports
to China alone run more than $120 billion a year. Much of what the
Chinese import is available nowhere else. The Japanese have deliberately
targeted ever tougher manufacturing challenges, thereby pioneering the
production of a succession of ever more miniaturized components that are
far beyond the unaided competence of the Germans, let alone the Koreans
and Taiwanese (and, of course, of the Americans and the British, who
started dropping out of capital-intensive, know-how-intensive
manufacturing a generation ago). Of course the pattern is for the
Koreans and Taiwanese to follow in Japan's footsteps after a lag of
about 10 years but they do so with machines and manufacturing
technologies acquired from Japan. It is a win-win for all involved.

In "crown jewels" technologies moreover, the Japanese have actually
strengthened their grip over the years. Take, for instance, something as
seemingly mundane as silicon for silicon chips. Each new generation of
computer chip requires an ever more refined version. It is a challenge
that has required ever more rarefied production technologies. The last
remaining American producer was Monsanto, which dropped out decades ago.
Even Germany's Wacker Chemie, the only European supplier, no longer can
make the real thing and contents itself with making a semi-purified form
known as "poly." These days two Japanese companies, ShinEtsu and Sumco,
make virtually all the world's supplies of semiconductor grade silicon
crystal. One tiny American company is still technically in the business
but its key factory is in Japan and its entire operation is a figleaf
for Pentagon contracting purposes. (It is worth pointing out that
several American companies make silicon wafers but that is a separate,
less sophisticated activity that depends on crystal sourced from Japan.)

Paul Krugman has already extensively and skillfully debunked the
ideologues in U.S. domestic economic policy and rightly enjoys enormous
political influence. If he were to use this influence to explain to
Americans what globalism really means, he might change history. A
journey of a thousand leagues begins with the first step. It is time
Paul Krugman visited us in Japan and saw for himself what this "basket
case" economy really looks like.




Mita 2-18-3
Tokyo 108--0073
Telephone: (81) (3) 5476 8727 or 6435 3142
Website: http://www.fingleton.net

(2) The Myth of Japan's Failure, by Eamonn Fingleton


The Myth of Japan's Failure


New York Times
Published: January 6, 2012

DESPITE some small signs of optimism about the United States economy,
unemployment is still high, and the country seems stalled.

Time and again, Americans are told to look to Japan as a warning of what
the country might become if the right path is not followed, although
there is intense disagreement about what that path might be. Here, for
instance, is how the CNN analyst David Gergen has described Japan: “It's
now a very demoralized country and it has really been set back.”

But that presentation of Japan is a myth. By many measures, the Japanese
economy has done very well during the so-called lost decades, which
started with a stock market crash in January 1990. By some of the most
important measures, it has done a lot better than the United States.

Japan has succeeded in delivering an increasingly affluent lifestyle to
its people despite the financial crash. In the fullness of time, it is
likely that this era will be viewed as an outstanding success story.

How can the reality and the image be so different? And can the United
States learn from Japan's experience?

It is true that Japanese housing prices have never returned to the
ludicrous highs they briefly touched in the wild final stage of the
boom. Neither has the Tokyo stock market.

But the strength of Japan's economy and its people is evident in many
ways. There are a number of facts and figures that don't quite square
with Japan's image as the laughingstock of the business pages:

• Japan's average life expectancy at birth grew by 4.2 years — to 83
years from 78.8 years — between 1989 and 2009. This means the Japanese
now typically live 4.8 years longer than Americans. The progress,
moreover, was achieved in spite of, rather than because of, diet. The
Japanese people are eating more Western food than ever. The key driver
has been better health care.

• Japan has made remarkable strides in Internet infrastructure. Although
as late as the mid-1990s it was ridiculed as lagging, it has now turned
the tables. In a recent survey by Akamai Technologies, of the 50 cities
in the world with the fastest Internet service, 38 were in Japan,
compared to only 3 in the United States.

• Measured from the end of 1989, the yen has risen 87 percent against
the U.S. dollar and 94 percent against the British pound. It has even
risen against that traditional icon of monetary rectitude, the Swiss franc.

• The unemployment rate is 4.2 percent, about half of that in the United

• According to skyscraperpage.com, a Web site that tracks major
buildings around the world, 81 high-rise buildings taller than 500 feet
have been constructed in Tokyo since the “lost decades” began. That
compares with 64 in New York, 48 in Chicago, and 7 in Los Angeles.

• Japan's current account surplus — the widest measure of its trade —
totaled $196 billion in 2010, up more than threefold since 1989. By
comparison, America's current account deficit ballooned to $471 billion
from $99 billion in that time. Although in the 1990s the conventional
wisdom was that as a result of China's rise Japan would be a major loser
and the United States a major winner, it has not turned out that way.
Japan has increased its exports to China more than 14-fold since 1989
and Chinese-Japanese bilateral trade remains in broad balance.

As longtime Japan watchers like Ivan P. Hall and Clyde V. Prestowitz Jr.
point out, the fallacy of the “lost decades” story is apparent to
American visitors the moment they set foot in the country. Typically
starting their journeys at such potent symbols of American
infrastructural decay as Kennedy or Dulles airports, they land at
Japanese airports that have been extensively expanded and modernized in
recent years.

William J. Holstein, a prominent Japan watcher since the early 1980s,
recently visited the country for the first time in some years. “There's
a dramatic gap between what one reads in the United States and what one
sees on the ground in Japan,” he said. “The Japanese are dressed better
than Americans. They have the latest cars, including Porsches, Audis,
Mercedes-Benzes and all the finest models. I have never seen so many
spoiled pets. And the physical infrastructure of the country keeps
improving and evolving.”

Why, then, is Japan seen as a loser? On the official gross domestic
product numbers, the United States has ostensibly outperformed Japan for
many years. But even taking America's official numbers at face value,
the difference has been far narrower than people realize. Adjusted to a
per-capita basis (which is the proper way to do this) and measured since
1989, America's G.D.P. grew by an average of just 1.4 percent a year.
Japan's figure meanwhile was even more anemic — just 1 percent —
implying that it underperformed the United States by 0.4 percent a year.

A look at the underlying accounting, however, suggests that, far from
underperforming, Japan may have outperformed. For a start, in a little
noticed change, United States statisticians in the 1980s embarked on an
increasingly aggressive use of the so-called hedonic method of adjusting
for inflation, an approach that in the view of many experts artificially
boosts a nation's apparent growth rate.

On the calculations of John Williams of Shadowstats.com, a Web site that
tracks flaws in United States economic data, America's growth in recent
decades has been overstated by as much as 2 percentage points a year. If
he is even close to the truth, this factor alone may put the United
States behind Japan in per-capita performance.

If the Japanese have really been hurting, the most obvious place this
would show would be in slow adoption of expensive new high-tech items.
Yet the Japanese are consistently among the world's earliest adopters.
If anything, it is Americans who have been lagging. In cellphones, for
instance, Japan leapfrogged the United States in the space of a few
years in the late 1990s and it has stayed ahead ever since, with
consumers moving exceptionally rapidly to ever more advanced devices.

Much of the story is qualitative rather than quantitative. An example is
Japan's eating-out culture. Tokyo, according to the Michelin Guide,
boasts 16 of the world's top-ranked restaurants, versus a mere 10 for
the runner-up, Paris. Similarly Japan as a whole beats France in the
Michelin ratings. But how do you express this in G.D.P. terms?

Similar problems arise in measuring improvements in the Japanese health
care system. And how does one accurately convey the vast improvement in
the general environment in Japan in the last two decades?

Luckily there is a yardstick that finesses many of these problems:
electricity output, which is mainly a measure of consumer affluence and
industrial activity. In the 1990s, while Japan was being widely
portrayed as an outright “basket case,” its rate of increase in
per-capita electricity output was twice that of America, and it
continued to outperform into the new century.

Part of what is going on here is Western psychology. Anyone who has
followed the story long-term cannot help but notice that many Westerners
actively seek to belittle Japan. Thus every policy success is
automatically discounted. It is a mind-set that is much in evidence even
among Tokyo-based Western diplomats and scholars.

Take, for instance, how Western observers have viewed Japan's
demographics. The population is getting older because of a low
birthrate, a characteristic Japan shares with many of the world's
richest nations. Yet this is presented not only as a critical problem
but as a policy failure. It never seems to occur to Western commentators
that the Japanese both individually and collectively have chosen their
demographic fate — and have good reasons for doing so.

The story begins in the terrible winter of 1945-6, when, newly bereft of
their empire, the Japanese nearly starved to death. With overseas
expansion no longer an option, Japanese leaders determined as a top
priority to cut the birthrate. Thereafter a culture of small families
set in that has continued to the present day.

Japan's motivation is clear: food security. With only about one-third as
much arable land per capita as China, Japan has long been the world's
largest net food importer. While the birth control policy is the primary
cause of Japan's aging demographics, the phenomenon also reflects
improved health care and an increase of more than 20 years in life
expectancy since 1950.

Psychology aside, a major factor in the West's comprehension problem is
that virtually everyone in Tokyo benefits from the doom and gloom story.
For foreign sales representatives, for instance, it has been the perfect
get-out-of-jail card when they don't reach their quotas. For Japanese
foundations it is the perfect excuse in politely waving away
solicitations from American universities and other needy nonprofits.
Ditto for the Ministry of Foreign Affairs in tempering expectations of
foreign aid recipients. Even American investment bankers have reasons to
emphasize bad news. Most notably they profit from the so-called
yen-carry trade, an arcane but powerful investment strategy in which the
well informed benefit from periodic bouts of weakness in the Japanese yen.

Economic ideology has also played an unfortunate role. Many economists,
particularly right-wing think-tank types, are such staunch advocates of
laissez-faire that they reflexively scorn Japan's very different
economic system, with its socialist medicine and ubiquitous government
regulation. During the stock market bubble of the late 1980s, this
mind-set abated but it came back after the crash.

Japanese trade negotiators noticed an almost magical sweetening in the
mood in foreign capitals after the stock market crashed in 1990.
Although previously there had been much envy of Japan abroad (and
serious talk of protectionist measures), in the new circumstances
American and European trade negotiators switched to feeling sorry for
the “fallen giant.” Nothing if not fast learners, Japanese trade
negotiators have been appealing for sympathy ever since.

The strategy seems to have been particularly effective in Washington.
Believing that you shouldn't kick a man when he is down, chivalrous
American officials have largely given up pressing for the opening of
Japan's markets. Yet the great United States trade complaints of the
late 1980s — concerning rice, financial services, cars and car
components — were never remedied.

The “fallen giant” story has also even been useful to other East Asian
nations, particularly in their trade diplomacy with the United States.

A striking instance of how the story has influenced American perceptions
appears in “The Next 100 Years,” by the consultant George Friedman. In a
chapter headed “China 2020: Paper Tiger,” Mr. Friedman argues that, just
as Japan “failed” in the 1990s, China will soon have its comeuppance.
Talk of this sort powerfully fosters complacency and confusion in
Washington in the face of a United States-China trade relationship that
is already arguably the most destructive in world history and certainly
the most unbalanced.

Clearly the question of what has really happened to Japan is of
first-order geopolitical importance. In a stunning refutation of
American conventional wisdom, Japan has not missed a beat in building an
ever more sophisticated industrial base. That this is not more obvious
is a tribute in part to the fact that Japanese manufacturers have
graduated to making so-called producers' goods. These typically consist
of advanced components or materials, or precision production equipment.
They may be invisible to the consumer, yet without them the modern world
literally would not exist. This sort of manufacturing, which is both
highly capital-intensive and highly know-how-intensive, was virtually
monopolized by the United States in the 1950s and 1960s and constituted
the essence of American economic leadership.

Japan's achievement is all the more impressive for the fact that its
major competitors — Germany, South Korea, Taiwan and, of course, China —
have hardly been standing still. The world has gone through a rapid
industrial revolution in the last two decades thanks to the “targeting”
of manufacturing by many East Asian nations. Yet Japan's trade surpluses
have risen.

Japan should be held up as a model, not an admonition. If a nation can
summon the will to pull together, it can turn even the most unpromising
circumstances to advantage. Here Japan's constant upgrading of its
infrastructure is surely an inspiration. It is a strategy that often
requires cooperation across a wide political front, but such cooperation
has not been beyond the American political system in the past. The
Hoover Dam, that iconic project of the Depression, required negotiations
among seven states but somehow it was built — and it provided jobs for
16,000 people in the process. Nothing is stopping similar progress now —
nothing, except political bickering.

Eamonn Fingleton is an author who predicted the Japanese financial crash
of the 1990s; he is working on a book about the end of the American dream.

This article has been revised to reflect the following correction:

Correction: January 6, 2012

A previous version of this article included an incorrect figure for the
increase in life expectancy in Japan. It changed by 4.2  years, not 3.1.

(3) Manufacturing and the Limits of Comparative Advantage - Ralph
Gomory, former director of research at IBM

Ralph Gomory: Manufacturing and the Limits of Comparative Advantage


July 8, 2009 12:30:12

The concept of comparative advantage is used with great effect by
economists as a sheep/goat separator. Those who understand it are the
sheep, almost exclusively economists. The sheep sometimes use
comparative advantage to justify things that seem to the goats, the
non-understanders, to be counter to common sense. But the poor goats are
helpless, silenced by their own ignorance and the confidence of the
knowledge-wielding sheep.

Unfortunately, among the sheep are some who tell us that it doesn't
matter if we lose one industry after another to our rapidly developing
trading partners. We will just do something else that is in accord with
comparative advantage in the new economic situation.

I have suffered through too many discussions of this sort to view this
with anything approaching equanimity. One of these I remember
particularly vividly came at an economics meeting during a panel
discussion on trade. An audience member asked a university professor on
the panel how he would feel if most of the professor's courses were
delivered from India by someone else and at a lower price. His reply,
delivered with perfect confidence, was that it would not matter; he and
his peers would rather just teach graduate students anyway.

In a similar vein but on a far grander scale, the Financial Times
recently lectured the nation of Japan on its attempts to retain
manufacturing in Japan (using robots) in the face of low-wage
competition from other parts of Asia. The Financial Times, calling on
the wisdom that the recent economic successes of the financial sector
had apparently made self-evident, told the Japanese to give up
manufacturing and concentrate on research and on telling other nations
what to manufacture. The FT article had as its title "The malady of

Ignored in all these discussions is the obvious fact that when you don't
make for yourself the things you need, you will have to trade for them.
If you have to import cars and all sorts of manufactured goods, you will
be importing on a large scale; to trade for them you will need to create
additional goods or services that you can export on an equally large scale.

How does the FT's prescription for Japan stack up if we look at it that
way? It looks like nonsense. Research is a small-scale activity; in most
companies only a few percentage points of revenue. There is no way that
the output of this small activity can be traded against a nation's need
for manufactured goods. Similarly, you simply cannot pay for large-scale
imported education by teaching smaller numbers of graduate students,
even if they were all visiting foreigners so that all the teaching you
did counted as export.

If you give up large things and specialize in exporting small-scale
things for which the demand is limited, you will not be able to buy many
of the things that are needed on a large scale. If the things you are
going to export don't add up to something big, you will be neither
making nor importing what you need. You will simply not have them. You
will be a poor nation.

These are facts that are not easily overlooked and there is no reason to
think that David Ricardo, usually regarded as the father of comparative
advantage, overlooked them. In his 1817 book, Principles of Political
Economy and Taxation, Ricardo discussed the wine and cloth trade between
England and Portugal. He assumed that Portugal was more productive than
England in both of the traded goods, cloth and wine, and that Portugal
had a greater productivity advantage in wine.

Ricardo's remarkable observation was this: even though Portugal makes
cloth more productively than England, it still benefits her to move some
people from cloth-making to winemaking and then send the wine they
produce to England to exchange for cloth. Similarly, it benefits England
to move people from winemaking to cloth-making to make more cloth for
export. A shift of this sort works out well for both countries because
Portugal's advantage in wine production is larger than its advantage in
cloth. Both countries come out ahead. In the modern terminology, they
were exploiting the fact that Portugal has a comparative advantage in wine.

Some of Ricardo's successors, however, have elevated comparative
advantage into a principle all its own, with such rules as "countries
should specialize in the things in which they have a greater comparative
advantage." What is often taught nowadays about the England-Portugal
example is that England should make only cloth (specialize in cloth) and
Portugal should specialize in wine.

However Ricardo suggested a shift, he did not suggest that Portugal
should abandon making cloth, and he was right not to. In fact, in
Ricardo's example, whether the specialization prescription is right or
wrong depends, as it should, on the scale of the demand for the goods
being traded.

Suppose that the demand for wine is small compared to the demand for
cloth. And also assume the two countries specialize: England in cloth,
Portugal in wine. Portugal, while supplying all the wine that England
consumes, will get for it only a small amount; the small amount that
England is willing to spend on wine. This small value received for wine
exports will buy only a small value of cloth imports. This leaves
Portugal without its own production of cloth, for which there is a large
demand, and only a small quantity of imports. The Portuguese will be ill
clothed; they will be a poor nation.

With these demands, a far better solution with Ricardo's actual numbers
is for Portugal to make all the wine for both countries while continuing
its own cloth production to supply its cloth needs beyond what its wine
buys from England.

Yet the first solution, specializing in the good with the comparative
advantage and giving up the other without any regard for the scale of
demand, is what is being advocated for Japan by the Financial Times, and
often is pushed in the United States as well. It too will leave us a
nation that is poor indeed.

An alternative available in Ricardo's day was to ship gold to England to
buy the needed cloth. This was not a long-term solution then, nor is the
equivalent solution now. Each year we make up for the year's huge trade
deficit, not by shipping gold, but by shipping IOU's: treasury bills
which are essentially promises to pay later. As Warren Buffet puts it,
"we are selling the nation out from under us." When we come to pay this
enormous accumulation later we will then be poor indeed.

Yet that is the direction many in the United States would have us take
when they say that the country doesn't need manufacturing. What do they
say will replace manufacturing? One gets only vague responses to this

Let us by all means do the things in which we have the greatest
advantage. But let us make sure the new things we do, together with the
things we continue to do, add up to enough to make us a rich nation.
Vague talk about future innovations, about a post-industrial society, or
of an enormous explosion of services exports to where they can balance
the manufacturing trade deficit is not the stuff on which to bet the
prosperity of a nation. This vagueness disguises our real situation and
the need to rethink both our fundamental economic goals and how they can
be attained.

Manufacturing should not be given up but rather rebuilt, as G.E. CEO
Jeffrey Immelt has recently advocated. We cannot afford to get out of
manufacturing unless and until there are new things that we are good at
and that add up to the same scale. But today that condition is nowhere
near being met.

Manufacturing is both high-wage and R&D intensive, and comparative
advantage in manufacturing is not a gift of nature but something that is
mainly man-made. All of this strongly suggests that we should be aiming
at building a strong manufacturing sector rather than wishing it away. ==

Ralph Gomory was director of research at IBM:

(4) Japan's Current Account Surplus plummets to around $2 billion, a
result of Fukushima and high yen


Surplus plunges 85% in Nov. / Year-on-year fall to 138 billion yen marks
lowest level since Jan. 2009

The Yomiuri Shimbun

Jan. 13, 2012

The nation's current account surplus declined 85.5 percent in November
from the same month a year earlier to 138.5 billion yen, shrinking for
the ninth straight month, according to a Finance Ministry preliminary
report on the balance of international payments released Thursday.

The surplus was at its lowest level since January 2009, when the balance
fell to minus 132.7 billion yen due to the so-called Lehman Brothers shock.

The current account is the broadest measure of Japan's global trade of
goods and services.

The balance of trade in goods registered a deficit of 585.1 billion yen,
for its second straight month in the red.

Affected by a drastic decrease in exports of electronic components and
audiovisual equipment, among other products, the value of goods exports
shrank 3.1 percent to 4.99 trillion yen.

However, imports surged 14 percent to 5.58 trillion yen, mainly due to
an increase in energy prices.

The deficit in the services trade balance, which covers deals other than
goods, reached 115.1 billion yen. November marked the sixth consecutive
month of deficit expansion in this area.

The income account balance, representing earnings from foreign direct
and portfolio investments such as dividends from overseas subsidiaries,
stood at 934 billion yen, up 13 percent, underpinning the overall
current account surplus.

The ministry's preliminary report on foreign trade statistics for Dec.
1-20, also released Thursday, showed a 496.5 billion yen trade deficit.

(5) Bank of Japan spent around $140 billion buying foreign currency to
stop the yen rising in 2011

Japan spent over 14 tril. yen on forex interventions in 2011

Mainichi Japan

December 31, 2011


TOKYO (Kyodo) -- Japanese monetary authorities spent a total of 14.30
trillion yen (about $184.5 billion) on currency interventions in 2011,
the third-biggest amount on record, according to Finance Ministry data
released by Friday.

The ministry said Friday that it and the Bank of Japan did not step into
the foreign exchange market between Nov. 29 and Dec. 28.

The authorities conducted publicly announced market interventions three
times this year -- in March, August and October -- to stem the sharp
rise of the yen against the U.S. dollar and other major currencies.

On March 18, the ministry and the Bank of Japan stepped into the foreign
exchange market in a concerted manner with other Group of Seven
industrialized countries, the first such move in more than 10 years.

The joint intervention, which came a day after the dollar slid to a then
record low of 76.25 yen, was designed to curtail a burst of short-term
moves that followed the March 11 earthquake and tsunami in Japan.

The two other interventions, which mainly sold the yen for dollars, were
conducted unilaterally and triggered criticism even from some G-7
members arguing that the yen had not strengthened so much in effective
terms, and that any unilateral action is not effective enough, compared
with joint interventions.

The Tokyo authorities dismissed such a view, saying the yen's
appreciation was too rapid and caused downside risks to the Japanese
economy. A stronger yen normally hurts the nation's export-led growth,
paring the overseas profits of export-related companies when repatriated.

Japan has increasingly prepared funds necessary for interventions
through budgetary arrangement, most recently boosting the reserve funds
by 30 trillion yen. Finance Minister Jun Azumi has said he will not
hesitate to take "decisive" action in order to stem excessive rise of
the yen, suggesting additional interventions when necessary.

On Oct. 31, their intervention helped the dollar briefly recover to as
high as 79.55 yen after touching a new record low of 75.32 yen the same day.

Last month, the ministry said the authorities spent a total of 9.09
trillion yen between Oct. 28 and Nov. 28, an amount bigger than earlier
expected for the intervention, and the result triggered speculation they
stepped into the market even after their announcement on Oct. 31.

More specific data, including the frequency of interventions between
October and December, will be released in February.

On Friday, the dollar traded in the 77.50-70 yen range almost throughout
the day in Tokyo.

(6) Reaching Asia's 'final frontier' / Japan steps up efforts to crack
untapped Myanmar market


Fukutaro Yamashita / Yomiuri Shimbun Staff Writer

Jan. 15, 2012

NAYPYIDAW--Myanmar has been billed as "Asia's final frontier," and its
rich resources and cheap wage levels are increasingly catching the eye
of Japanese companies and the government.

Economy, Trade and Industry Minister Yukio Edano on Friday met with
President Thein Sein and other senior officials of Myanmar, and reached
an agreement on Japan's cooperation in the Southeast Asian country's
economic development.

Rivals from China and elsewhere in Asia have already made significant
investments in Myanmar's infrastructure and the procurement of natural
resources. Although Myanmar's development has lagged other Asian nations
due to economic sanctions imposed by Western nations, some restrictions
have been loosened in recent months as it has made steps toward

City Mart, a huge shopping center that opened in central Yangon,
Myanmar's largest city, last March epitomizes the country's rapid
economic development.

The shopping center has stores stocked not only with daily necessities
but also cosmetics from Japan, the United States and Europe, such as
Kanebo and L'Oreal. The center has several thousand customers a day.

Myanmar's per-capita gross domestic product is still the lowest level
among members of the Association of Southeast Asian Nations, but this
figure tripled from 235 dollars (about 18,000 yen) in 2007 to 702
dollars (about 53,000 yen) in 2010. The Myanmar government's promotion
of economic liberalization has been a major driver of this growth.

Myanmar's military junta had restricted investment from overseas, but
after the country's general election in 2010, it changed tack and has
rolled out the open mat to foreign investment. Foreign investment in
Myanmar in fiscal 2010 totaled about 20 billion dollars--an about
70-fold jump from 300 million dollars the previous year.

Myanmar has huge quantities of undeveloped natural resources such as
natural gas, oil and rare earths. Future investment is widely expected
in social and economic infrastructure, such as power generation and
financial systems.

Myanmar's population of about 60 million is one of the largest among
ASEAN members. Labor costs are less than one-fifth of those in China or
Thailand, a tempting prospect for Japanese makers.

"We have high expectations that the country could be an alternative
production base to replace the two countries that have political and
flood risks," an official of a Japanese electric machinery maker said.

China, Thailand and South Korea have invested far more in Myanmar than
other countries have, including Japan.

Japan was once Myanmar's largest aid donor. However, bilateral ties have
cooled since 1988, when Western countries imposed economic sanctions on
the country.

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