March 26, 2023

Japanese Consumers Start to Buy, Tentatively

“Things are generally looking brighter, aren’t they?” Mr. Horii said, as he scrutinized, then dismissed, cheaper alternatives at the bustling Yodobashi Camera electronics store. The Bose ones he has his eye on, which he’ll hook up to his TV, go for about $400.

“I don’t really need it, but I want it,” he said. “A good economy means you can buy things you don’t really need.”

Prime Minister Shinzo Abe’s bid to revive Japan’s deflated economy hinges on consumers like Mr. Horii starting to feel flush enough to start splurging on the finer things in life.

A wide recovery in consumer spending has been the weakest link in “Abenomics,” the bold economic stimulus strategy that Mr. Abe has pushed since taking office in late December.

Abenomics has already brought big profit bumps to the nation’s exporters, thanks to a yen made weaker by Mr. Abe’s aggressive policies. He found a kindred spirit in Haruhiko Kuroda, the Bank of Japan’s new governor, who has committed the central bank to easing the money supply and reinflating the economy. Stock markets have rallied, as foreign investors jumped back into a country they had all but written off for its seemingly unshakable stagnation.

Numbers released on Friday by the government provided more proof of Japan’s corporate recovery. Industrial production rose by a robust 2 percent in May from the previous month. Tokyo’s benchmark Nikkei index climbed 3.5 percent Friday on the strong showing.

Reversing a 15-year-long slide in prices, which Mr. Abe has singled out as both a cause and a symptom of waning profits, wages and consumption, is a tougher order. For companies to feel confident enough to start raising prices, Japan’s consumers have to start spending again, and data confirming that trend is still mixed.

Separate figures released on Friday showed that household spending fell 1.6 percent in May from a year earlier, confounding economists’ expectations of a 1.3 percent rise. Still, for the first time in seven months, Japan’s core consumer prices in May did not fall compared to the previous year, staying flat for that month after falling 0.4 percent the previous month.

“We are comfortable with our view that the uptrend of consumption continues,” Masamichi Adachi, Tokyo-based economist at JPMorgan Securities Japan, said in a note Friday. “An expected rise in summer bonuses, paid in June and July, and improvement in general sentiment are the main reasons,” he said.

There are some signs that after years of penny-pinching, conspicuous spending is on the rise again in Japan. But for now, it is starting at the very top, among the financiers, professionals and other well-to-do Japanese who have benefited from the recent stock market gains.

Sales of Ferrari cars in Japan have jumped almost 20 percent so far this year, figures from the Japan Automobile Importers Association show, thanks to this newfound exuberance among the nation’s rich.

“We’ve seen confidence start to explode over the last months,” said Herbert Appleroth, chief executive of Ferrari Japan. “We’re seeing some of the highest growth in the world here.”

At the Hankyu Umeda department store in Osaka, sales of luxury watches, jewelry and other luxury items are surging, which lifted overall sales in May by 63 percent compared with the previous year, the sixth straight month of double-digit increases.

“Japanese shoppers are tired of cheap,” said Keiji Uchiyama, manager of the marble-floored store, brimming with imported fragrancespastel macaroons and slick designer bags. “They’ve scrimped for so long, but now they’ve had enough,” he said.

Article source:

Economix Blog: Bernanke Says Better Days Lie Ahead

Ben S. Bernanke is, of course, the chairman of the Federal Reserve, but he always seems most comfortable as an educator, a role he slips into for a commencement address on Saturday at Bard College at Simon’s Rock.

If you’re looking for news about monetary policy, read no further. Mr. Bernanke’s speech mentions not a word about his day job. (In 2009, he opened a commencement address by saying, “The business reporters should go get coffee or something, because I am not going to say anything about the markets or monetary policy.” This time, we had to read the whole thing to make sure that no hint of news was buried inside.)

No doubt the graduating class will be much relieved to have avoided a modern version of Paul Volcker’s commencement address at American University in 1984, dug up by Catherine Hollander of National Journal. One can only imagine the faces in that audience as Mr. Volcker announced, “I’d like to take advantage of your captive presence today, before you scatter into the real world, to reflect a bit on that uniqueness, on the justification for our special role and degree of independence within the government, and on the special responsibilities that independence implies.”

What Mr. Bernanke’s speech delivers, instead, is a brief and engaging sketch of the debate about the state of innovation.

Economic growth depends on innovation, and some see evidence we’re having less of it — or at least that the areas of ongoing innovation, like information technology, are making less difference in our lives. The economist Robert Gordon wrote last year that we’re no longer inventing anything as useful as indoor flushable toilets. The economist Tyler Cowen offered a fluid account of the same basic argument in a brief, important book with a long title: “The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick and Will (Eventually) Feel Better.

Mr. Bernanke, describing this argument, compares the present moment with life in 1963, when he was 9 years old. “Though my memory may be selective, it doesn’t seem to me that the differences in daily life between then and now are all that large,” he says in the prepared text of the speech. “Heating, air conditioning, cooking, and sanitation in my childhood were not all that different from today. We had a dishwasher, a washing machine and a dryer. My family owned a comfortable car with air-conditioning and a radio, and the experience of commercial flight was much like today but without the long security lines. For entertainment, we did not have the Internet or video games, as I mentioned, but we had plenty of books, radio, musical recordings, and a color TV (although, I must acknowledge, the colors were garish and there were many fewer channels to choose from).”

But the real concern is about the future: What if life continues to resemble 1963? What if the Internet doesn’t change the world?

And on this count, Mr. Bernanke breaks with the bleak traditions of his dismal profession to declare himself a fundamental optimist.

He notes that pessimism also ran rampant in the 1930s; it is human nature to assume (and to predict) that current trends will persist. “It is common to hear people say that the epoch of enormous economic progress which characterized the 19th century is over; that the rapid improvement in the standard of life is now going to slow down,” John Maynard Keynes wrote at the time. Mr. Bernanke adds, “Sound familiar?”

Moreover, he says it is probably too soon to judge the impact of recent innovations.

And he sketches a world in which more people in more countries are pursuing innovations in competition for ever-greater rewards: “In short, both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.”

So cheer up, graduates! It’s a difficult time to be young but, as this blog notes frequently, you’ve just taken the single most important step to improve your own prospects: You earned a college degree. Now do the rest of us a favor and innovate.

Article source:

Bucks Blog: Everyone Should Use the Overnight Test

Carl Richards

Carl Richards is a certified financial planner in Park City, Utah. His new book, “The Behavior Gap,” was published this week, and we’ll be running excerpts all week long. Meanwhile, his sketches are archived here on the Bucks blog.

A friend of mine recommends what he calls the Overnight Test. Ask yourself what you would do if someone came in and sold all of your investments overnight. The next morning you wake up and you’re left with 100 percent cash in your account.

Here’s the test: you can repurchase the same investments at no cost. Would you build the same portfolio? If not, what changes would you make? Why aren’t you making them now?

Patricia Wall/The New York Times

People have a tough time with this one. Maybe they’ve long since forgotten why they bought those investments in the first place (there must have been some reason, right?). It’s kind of like certain relationships: you grow apart, your lives take different directions and there’s nothing much left to talk about … but you keep hanging around with each other because change would require work.

In the case of investments, you can’t afford that kind of stagnation. You need investments that make sense given your current goals, which means you need to take a look at those goals, which means … work. This is why some people who take the Overnight Test just want to ask (Please!) for their old investments back. They may not admit it, but they just don’t want to do the work of coming up with new ones.

I understand. We’re busy. We have a lot on our minds. Who wants to add another item (in this case, “review investment portfolio”) to their to-do list? Unfortunately, this is one to-do that really needs to get done. I’m not talking about change for the sake of change. Buying and selling investments costs money. I’m saying you need to know what you own, and why you own it.

Excerpted from “The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Money,” published by Portfolio/Penguin. Copyright © Carl Richards, 2012. Reprinted with permission.

Article source:

India Adds a Slowing Economy to Its Corruption Woes

On Thursday, for instance, as the Indian government negotiated with a fasting anticorruption crusader, the country’s central bank issued a blunt warning: economic growth could soon fall below 8 percent.

Most countries would be thrilled to have a growth rate of more than 7 percent, but for India, which strode at a 9 percent pace before the financial crisis of 2008 and hit 8.5 percent last year, it would be a significant letdown. Slower growth would mean fewer Indians climbing out of poverty and could help spur greater social unrest.

And it would pose yet another challenge to the global economy, which is increasingly depending on emerging markets like India and China to make up for stagnation in the West.

The Indian slowdown was in the making long before most analysts were concerned about a double-dip recession in industrialized nations. Private investment has been sliding since late last year and once-robust car sales have decreased in recent months. Indian stocks began falling in November and are now down more than 24 percent from their high. Moreover, inflation has been hovering at nearly 10 percent even after the Reserve Bank of India raised interest rates 11 times in less than two years.

“Today, the economy is running on the engine speed achieved some time ago,” said R. Gopalakrishnan, an executive director at the Tata Group, India’s largest business conglomerate. Stressing that he was speaking for himself and not his company, he added, “It’s not sputtering to an end, but it’s slowing down.”

The new economic worries are occurring while the Indian government has been preoccupied with the biggest protests the country has seen in nearly two decades.

The demonstrations are led by an activist, Anna Hazare, who has been on a hunger strike since Aug. 16. He says he will not eat until the Indian Parliament creates a powerful anticorruption agency known as a Lokpal. His movement has gained a large following in big cities like New Delhi and Mumbai, especially among the middle class and the young.

While corruption, especially in day-to-day dealings between public officials and ordinary citizens, is the primary focus of most protesters, many of Mr. Hazare’s supporters have also complained about high inflation and a lack of job opportunities. Some of them say corrupt practices have driven up the price of goods and services and distorted the economy.

“If the Lokpal bill passes, the economic issue will be good,” said Sagar Bekal, a 25-year-old construction manager in Mumbai who has organized protest rallies for Mr. Hazare’s group, India Against Corruption. “There will be a change — good social life, things getting much cheaper with corruption being curbed.”

Such sentiments, analysts say, reflect the middle class’s growing conviction that Indian leaders seem more concerned about reaping the rewards of economic growth for themselves than about improving the country. India has endured a series of large corruption scandals in the last year, involving the auctioning of wireless licenses, the Commonwealth Games of last year and various real estate deals.

“People are so dissatisfied that they want a change,” said Harsh Goenka, chairman of RPG Enterprises, a Mumbai-based conglomerate involved in several businesses. “They want a change in governance.”

Still, he and others say that the broader economic problems are unlikely to dissipate even if lawmakers agree to create a new anticorruption agency, which is not expected to become an active watchdog for a couple of years. Rather, these people say, the government needs to move quickly to put in place changes to enhance growth, create jobs, tame inflation and improve public services.

That task, of course, has become more urgent and difficult in recent weeks because of rising fears of a double-dip recession in the United States and Europe. But because it is not a big exporter, India is more insulated from global shocks than other developing countries. Still, it relies significantly on foreign capital to meet investment needs.

In a report published on Friday, analysts at Deutsche Bank said India’s growth rate could even slip below 7 percent if the United States and European Union fell into a recession.

Article source: