Saturday, April 30, 2011

When will Japan Go from 0 to 1?

Governor Masaaki Shirakawa
Bank of Japan Governor Masaaki Shirakawa said on Saturday "We'd like to take appropriate policy steps as needed while monitoring the economy and prices, taking into account that uncertainty over the outlook is high,"
 It hasn't been easy for Japan to come out of the financial risis, but it has now become next to an impossible task for Japan to come out this earthquake crisis, which has now giving Japan a sad time. rfom a projection of 2.2% growth in GDP in January, they are now down to around 0.6% growth in GDP. Which is not a good sign.

Here is a another problem that is shaping up at the other side, Japan;s debt has now twice their GDP, and not so surprising  is their aging population. So i can't make up my mind on when can Japan truly cross this 0 barrier. What has been happening now is that the factory output due to this 9.0 earthquake has damaged Japan's economy so severely that their factory outputs have got disrupted very badly, with many major car makers working at 15% of their total capacities, and don't expect to return to full capacity than next year or so, spare parts have risen in costs, Nokia, has had a major hit as well.

No, what is going at the BOJ end. They are on course to loosen their monetary policy further and inject more cash into the economy, so that more credit is easily accessible. Now here is the surprise package, they are already having the interest rates at 0-0.10%, and what more loosen the policy would mean for the ailing economy. Where as on the other side of the world, USA has said that it would stop their QE2 measures in June, as well as that Europe had a rise in their rates to 1%. So this way from 0 to 1, is going to put the world on their toes still as Japan's exports won't be available to the markets still till the end of the year, and also that there is a high risk of inflation as well, which has started to take some charge in many developed economies such as Europe, USA and China.
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