The latest piece of news of Japan does not make for happy reading I am afraid and although we have seen some tentative signs, as of late, of a stabilisation this has to be very preoccupying for Japanese policy makers. As Edward pointed out recently, the rise in consumer confidence and sentiment in general is masked by a strange absense of any kind of material pick up in real economic indicators and now we get the follow blow to the kidneys.

Japan’s consumer prices fell at a record pace in May, adding to the risk that deflation will become entrenched and hamper a rebound from the nation’s worst postwar recession. Prices excluding fresh food slid 1.1 percent from a year earlier after dropping 0.1 percent in the preceding two months, the statistics bureau said today in Tokyo. It was the sharpest decrease

...

I don't typically like spending a lot of time on stories that have more coverage by blogs than actual news outlets, but this one is really too juicy to pass up and it also continues our ongoing conversation about the dollar's prominence as a global reserve currency. Two men were recently stopped by Italian authorities while trying to cross the border into Switzerland with a fake-bottomed suitcase containing $134.5 billion worth of US Treasury bonds. That's right - billion with a B. Let's take just a moment to review which of the United States' various creditors even hold that much US debt. According to the latest data from the US Treasury Department, this is what we have to work through April of this year:

China ~ $763.5 billion Japan ~ $685.9 billion Caribbean Banking Centers ~ $204.7 billion OPEC ~

...

The greenback surges on an confidence from an unlikely ally,  686 billion reasons for Japan not to laugh at the U.S. dollar’s fate,  Lessons from the political obituaries and plenty more…

Hoorah! The dollar is saved! How do we know? The Russian finance minister told us so!

The dollar is in “good shape” according to Alexei Kudrin, who cautioned the Group of Eight conference in Lecce, Italy, over the weekend that, “It’s too early to speak of an alternative [to the U.S. dollar].”

Even politicians from the Former Soviet Union have the right to their opinion, of course, just as we reserve the right to disrespectfully disagree. And, so it appears, do other members of the same, somewhat confused Rusky government. A few days before Kudrin was heard drumming up support for his unlikely ally at the G8 roundtable, Russia’s president, Dmitry Medvedev joined China’s central bank Governor Zhou Xiaochuan

...

I'm a few days behind on this as I've been busy with other parts of this website, but there have been a number of developments since my post last week regarding how Russia discusses its currency maneuvers. The specific language used here is VERY important, so bear with me as I get nitpicky.

First, the facts as reported by various news outlets whose links are embedded within each bullet point:

Bank Rossii officials announced a plan to swap $10 billion worth of US Treasury holdings.for the equivalent in the proposed IMF bond issue expected in the fourth quarter of this year.Brazil and China also expressed interest in buying $10 billion and $50 billion, respectively, of IMF bonds. Alexei Kudrin said Russia has full ...

Japan’s Cabinet Office said today (Wednesday) that economic output fell to its worst levels ever, tumbling an annualized 15.2% in the first quarter, as the worst recession in 60 years hammered exports and consumer demand.

Despite the disturbing news from Japan - the world’s second largest economy - some analysts are optimistic that the record gross domestic production (GDP) decline may be the low point, with business activity picking up from here.

“There was a collapse across the board,” Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo, told Bloomberg News. But there’s “light at the end of the tunnel,” he said, adding that he believes the economy will rebound this quarter as companies replace inventories and stimulus plans begin to take effect.

Prime Minster Taro Aso has set forth the largest stimulus plan in Japanese history, promising to pump $160 billion into the economy, mostly

...

by Edward Hugh: Barcelonabr /br /Japan's contraction showed signs of easing in March, even though the recession has now set in for the duration, the deepest point may well have been passed. The ship may be stable, but it is still far from being right side up.br /br /strongIndustrial Output Up On The Month/strongbr /br /Japan's industrial output rose in March (more than anticipated), and showed the first gain in six months, suggesting that the steepness in the plunge in production and exports may be softening. The rise followed a record 10.1 percent fall in industrial production in January and a 9.4 percent drop in February. Manufacturers also forecast further gains in production in the coming months, suggesting output may be bottoming out after the sharpest decline on record in the first quarter of the year.br /br /br /pa href="http://3.bp.blogspot.com/_ngczZkrw340/Sf3hYl4ZGKI/AAAAAAAANpE/kOsvDIQsqgQ/s1600-h/japan+ip+yoy.png"img id="BLOGGER_PHOTO_ID_5331665346478282914" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: ...

Japan moving toward $200 billion-plus direct buying of ETFs to stimulate economy.  

 

In the United States, exchange-traded funds served as a key measuring stick for bond traders last fall when trying to stimulate liquidity as credit markets froze. 

Now, the Japanese government is apparently about to turn to ETFs to do much the same with its stock market.

Reports from several wire services Thursday are pointing to an article in the Yomiuri Shimbun newspaper's morning edition that regulators are debating asking the Bank of Japan to buy stock ETFs to prop up the country's ailing markets. 

Leaders are also talking privately about enticing the bank to move forward with the plan by offering government financial support in the case that any losses result from such a move by the BOJ, according to a Reuters report. 

The article also noted that the Japanese paper cited an unnamed ruling party official saying

...

Japan has been seen since September as one of the few bastions of relative stability in the global economic climate. It “only” fell approximately 30% during the September crash, compared to the approx. 40-60% of the US and China respectively, and has weathered the global economic storm much better than most. This is evidenced by the following Emerginvest performance charts of Japan, China, and the US – note the relatively shallow decline in September for Japan compared to its counterparts:

Japan’s Market Performance over the last year.

China’s 12-Month Market Performance

…

by Edward Hugh: Barcelonabr /br /Well last week Kazuo Momma, head of the Bank of Japan’s research and statistics department, warned that Japan’s economy now faced an “unimaginable” contraction, and today we can begin to see just what the unimaginable might look like, since the preliminary data are for fourth quarter GDP are now out. What we find is when we come to stare the unimaginable in the face is that Japan’s economy contracted by 3.3 per cent in the three months to December when compared with the previous quarter, effectively the country’s worst economic performance in 35 years.br /br /On an annualised basis, gross domestic product declined at a rate of 12.7 per cent, a number which perhaps better than any other highlights the depth and severity of a slump that has surely now dispelled all those early hopes that the global economy might be able to shrug off …

by Edward Hugh: Barcelonabr /br /Yesterday's comments by Bank of Japan Governor Masaaki Shirakawa that conditions in Japan's economy are severe and that monetary conditions are rapidly tightening should not be taken lightly in my opinion. Viewed alongside last weeks data revision which showed that Japan’s gross domestic product contracted much more rapidly in the third quarter than initially thought, and the recent admission by Japan’s Finance Minister Shoichi Nakagawa that employment conditions are also nowbecoming “severe.” it is clear that we are in the process of settling-in for what promises to be quite a long and hard recession.br /br /Revised data released last week showed that gross domestic product fell on quarter-by-quarter basis by 0.5 percent during the three months up to September, as compared with the preliminary estimate of only a 0.1 per cent decline. Year on year, the economy is now thought to have also contracted by ...