After almost a quarter of a century of economic purgatory Japan is printing money again in an attempt to return to the land of the living, albeit with a rapidly ageing population. This morning Australia’s business commentators look at the policy in the context of Japan’s previous attempts to rekindle its fortunes as well as the current economic environment, where it will not be the only protectionist.
Also in this morning’s shot from The Distillery, two more business writers throw their two cents in for Tom Albanese’s departure from Rio Tinto. Thankfully, the extra time to ponder the event has led to two well thought out pieces.
But first, Fairfax’s Brian Robins describes Japan as a fat man on a diet, unable to give in to the occasional instinct to binge.
"The trick is whether the new round of central bank money printing and government spending will lead to just spurious pork barrelling or a more fundamental revival of an ailing economy. And the devil is in the detail, since the new unlimited central bank purchases will not kick in until 2014, with a planned ¥13 trillion of monthly purchases mostly shorter-dated paper with the broad aim of holding rates at zero. This will rise from the expected ¥100 trillion outlaid through 2013. That extra stimulus will come just as the consumption tax is to be raised from 5 to 8 per cent before hitting 10 per cent from 2015, which may limit any potential upside.”
While Japan has managed to turn one lost decade into two, The Australian Financial Review’s Andrew Cornell says academic careers have been forged trying to figure out why the country is still in a liquidity trap.
"The truth is over the past two decades Japan has never really committed all the weapons it could to reflating its economy. While interest rates were cut to zero, the BoJ resisted. BoJ hawks, paranoid about the hyper-inflation of the 1930s, mopped up the money anyway.”
The Australian Financial Review’s Asia-Pacific editor Greg Earl argues that Japan can stimulate the economy all it likes, the Asian giant has a serious problem that needs addressing if any meaningful economic recovery is to take place.
"There is just too little demand from an ageing, deflation-minded population to consume the country’s potential production, especially after seeing stimulus plan after stimulus plan falter.”
Business Spectator’s Stephen Bartholomeusz stresses that protectionism only works if you’re one of a relatively small number doing it.
"There is no doubt the aggressive attempt by Japan to reflate an economy that has been deflating for the best part of a quarter of a century and the prospect of a new flood of cheap Japanese exports is causing concern in Europe, China, the rest of Asia and the US about the impact on their own manufacturers. If they try to defend their shares of global trade in what is a difficult, low-growth global economic environment everyone will ultimately be losers from a new wave of protectionism. The yen had already fallen heavily against other major currencies, including the Australian dollar, as Abe’s intent became clear.”
The departure of Rio Tinto’s Tom Albanese is still getting bylines. Thankfully, this morning’s offerings are from two of our more considered commentators. The Australian’s Bryan Frith says quite simply that Rio should have dropped Tom Albanese long ago.
The Australian Financial Review’s Matthew Stevens argues that Albanese has successfully broken the conservatism at Rio that was so engrained before his elevation. It’s been his execution that’s let him down, not his strategy, writes Stevens.
"Not long after his appointment in 2007, Albanese made it quietly clear that a more aggressive, open-minded approach to mining’s emerging frontiers would mark one difference between he and his vastly respected predecessor Leigh Clifford. The view, expressed with typically modest certainty, was that Clifford’s conservatism when it came to some new horizons had become a matter of frustration for some of his management team, most particularly those attempting to forge growth in copper, where known deposits were mature and new ones are particularly hard to come by. There can be no question that Albanese delivered on that opening mission statement.”
And Fairfax’s Adele Ferguson reveals that anecdotal evidence from the retail sector points to slowing sales in January, which means price wars to the benefit of the consumer and the detriment of some manufacturers.
"…It comes almost two years since beer giant Foster's took the bold step of aborting delivery to Coles and Woolworths liquor outlets tens of thousands of cartons of VB, Carlton Draught and Pure Blonde after learning of a promotional campaign to sell the brands at below cost. Over the past two years there have been a lot of column inches, political debates and regulatory scrutiny of the detrimental impact of the supermarket wars on suppliers, farmers, independent retailers and retail competitiveness generally. Unfortunately, most suppliers are reluctant to speak on the record for fear of upsetting their masters, and the ones that Coles rolled out in a pamphlet last year are so well versed in their lines that it is hard to take them as representative of the norm.”
In other news, The Australian’s John Durie says the more important issue for the Australian Competition and Consumer Commission’s High Court case against TPG is the suggestion from the full court that the $2 million fine imposed should actually be something closer to $500,000.
The Australian Financial Review’s Chanticleer columnist Tony Boyd muses that the Future Fund infrastructure boss Raphael Arndt must be wondering how the Australian Infrastructure Fund asset purchase deal managed to blow up into accusations pertaining to ethical corporate practice.
And finally, the Herald Sun’s Terry McCrann takes on comments from a senior BlackRock executive that Australia’s sovereign risk is relatively low, and wins.
The point McCrann makes is that the executive frames sovereign risk in his comments as the ability of a nation to repay its loans.
That’s a form of sovereign risk and no one was ever arguing that Australia wouldn’t be able to meet its bills. It’s whether we keep changing taxation systems to such an extent that international investors can no longer tolerate such a lack of stability.