Japanese reflation

[Shanis]

Japan introduced today their economic stimulus package. The economic stimulus package is 15 billion Yen big, that´s about 113 milliard Euro or 149.499.179.118,658 USD (calculated with the exchange rate of 09. Apr. 2009 I hope it´s correct like that^^). The japanese government wants to help their export orientated economic, which is groggy from the economic crises.

What do you think about this aid package? I think it´s risky to pump that much money in once ludicrously when the exchange rate is already that low, compare: 1 JPY (Yen) = 0,00997 USD. That may help their car trade because if the exchange rate is low, your products in other countrys, to which your exchange rate is low, are getting cheaper so more people will buy them. The problem is the inflation, japanese people will have to pay more for the products because of it and there can be the same problem as with argentina, argentinas money is worth nothing they have to devalue their money or they won´t get any money from the world bank or other countrys. If that happens, japan has bigger problems as it now has.
Hope you can give me some good points of view, for me this economic stimulus package is too risky ^^

[Troo]

Japan's suffering a similar problem to the UK - their base interest rate is ludicrously low, so they have no economic wiggle room.

A stimulus package will only help if the rate of interest also starts rising a little.

[Shanis]

I don´t think the japanese interest rate will rise enough, they may sell some more products but other countrys, like germany and the uk, are supporting their own car trade so japan won´t sell their cars and many people suffer under this economic crisis, they have a low budget or even loose their job or they save money in case they´ll loose their job so they won´t buy that much products, no matter how cheap they are.

[fluffy0000]

ritholtz.com/blog
the Big Picture
By Peter Boockvar - March 31st, 2009, 9:30AM
Groundhog Day
Like out of a scene from ‘Groundhog Day,’ Japan announced that they will unveil another stimulus plan, their 3rd in this down cycle and I don’t have enough fingers or toes to count how many stimulus plans the 2nd biggest economy in the world has had since 1990. My point is that there is no precedent whatsoever of a country’s government printing money and spending its way to prosperity, especially in the face of a massive deleveraging.

[Troo]

Exactly. Printing more money is what got Italy into deep sh*t post WWII.

[Goku]

Japan's economic situation is like a nightmare, which probably started the moment the government had to step after the economic bubble burst twenty years ago.

Government debt is probably approaching 200% of GDP, exports have declined by 50% in the past 12 months, rising unemployment and decline in business activity resulting in a reduction in tax receipts, aging population and increased spending on pensions, very low birth rate, a currency exchange which defies gravity (and logic).

A definition of insanity: doing the same thing over and over again and expecting a different outcome. Ongoing stimulus packages from an essentially bankrupt government with no economic credibility. All I can say is, I'm deeply concerned for Japan.

[ozkai]

Originally Posted by Troo

Exactly. Printing more money is what got Italy into deep sh*t post WWII.

Japan did it rpeviously and it worked.

[Shanis]

Japans economic situation scares me, Japan was for me always a shining country with a low exchange rate of money but without other bigger economic problems but I´m glad that I got a different point of view while I was in here. But back on topic, I think japan needs to devalue their money, maybe make a new currency like germany did the euro, that would make a new exchange rate and it would me like some kind of clean slate and make japan more simpatico. I mean, with a new currency the products may be sold better in japan and the exchange rate would rise, they get more money for their products abroad without making them more expensive and they can easier pay for their current arrears. If they do it or not, japan has to change something in it´s economic situation or they will get into big trouble.

[komitsuki]

Originally Posted by ozkai

Japan did it rpeviously and it worked.

That's because Japan moved a lot of its factories to China, Taiwan and South East Asia easily during that time.

[Troo]

Realistically there are no simple fixes when entire economies are broken. There are so many contributing factors that the resulting mess is larger than the sum of its parts.