Japan core CPI accelerates in-line with expectations


Japan October CPI: 1.1% versus 1.1% previous.

Japan October CPI (ex-fresh food): 0.9% (five-year high) versus 0.9% expected and 0.7% previous.

Japan October CPI (ex fresh food, energy): 0.3% (highest reading in 15 years).

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Comments (29)
  • whidbey
    , contributor
    Comments (3483) | Send Message
     
    Good news - Abe knows how to manipulate price levels.

     

    Bad news - Abe gets the worst of both worlds, increased inflation and no sustained growth of GDP.

     

    Watch out Abe, you may get what you asked for, but not all of it.
    28 Nov 2013, 08:31 PM Reply Like
  • minecanary
    , contributor
    Comments (1003) | Send Message
     
    Yeah Whidbey...but their plan is driven by a central banker too, so if it isn't working, they think they just need to do more of it.
    28 Nov 2013, 09:43 PM Reply Like
  • Tales From The Future
    , contributor
    Comments (6826) | Send Message
     
    This is madness. And an end game for fiat money monetary policy.

     

    Japan can't inflate away its debt, if interest rates rise over time on the 10Y JGB they will need all their tax revenue just for interest payments.

     

    How will the keep rates down forever? Which one of the Japanese megabanks holding the debt (or other debt holders, mostly institutions in Japan and a few unlucky retail buyers of JGB) will blink first and sell of their JGB?

     

    We are in the quadrillions of debt now.

     

    This is going to have worldwide ramifications on public debt of other countries. Just wait a few years.

     

    The Lehman collapse was just a snack compared to this full meal of opened Pandora boxes. Maybe Pandora Bento boxes would be more appropriate here.

     

    Itadakimasu, future generations of Japan...oh well, all I can offer is a bad analogy.

     

    Kyle Bass is the new Peter Schiff. He warns and warns, yet (almost) nobody listens...

     

    PS: Watch gold and silver charts explode on that Kyle Bass Day X. All I can say to readers living in countries with bad public debt/GDP figures (which is most countries) and not endowed with hard assets such as oil etc. within their territories is hold on to their shiny metals until that day X.
    28 Nov 2013, 10:23 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (12649) | Send Message
     
    This is scary for Japan given oil is at lows. If inflation in energy normalizes Japan may be seeing the end of its QE ambitions as it ignites inflation and makes its government debt unsustainable even if it is all financed through internal savings.
    28 Nov 2013, 11:51 PM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    The funny thing is that Japan acts as if it had the luxury of relying on the Yen as a reference currency. Inflation is still low thanks to the aging population which acts as a deflationary counter-force, but it is always difficult to say when high inflation will start.
    That also was the case with Weimar.
    China's claim on the islands might be the trigger for high inflation.
    29 Nov 2013, 06:39 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    Japan's imports are getting much more expensive as its currency collapses against the euro.

     

    How is Japan going to service its debt at normalized interest rates?
    29 Nov 2013, 10:50 AM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "How is Japan going to service its debt at normalized interest rates?"
    Servicing the debt is done the way every CB does these days: by expanding it's balance sheet. That way the interest rates stay low.
    However, if the debt is really huge, the balance sheet expansion has to be huge as well and that sends the currency down, which is good for exports.
    Who said that there were no currency wars ?
    Expect the Yen to further plunge (bad for CAT, to name but one C°).
    Luckily the US use the same weapon: currency depreciation.
    29 Nov 2013, 11:02 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    But who is going to buy the bonds?

     

    If the answer is the central bank then what is the true value of the bonds..what mechanism exists to determine that?

     

    How is Japan's massive geriatric population supposed to live on less than 0.90% in bond income if the government is hellbent on sparking inflation?

     

    This doesn't make any sense!
    29 Nov 2013, 11:27 AM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "But who is going to buy the bonds?"
    The mechanism by which the majority of Bonds (Treasury-emissions) is being bought by the Central Bank is already in place in Japan: the BoJ buys around 75% of the Japanese Public Debt.
    Soon it'll be 100%.
    In the US the situation is not so dare yet because the USD is a reference currency supported by different nations (think of the petrodollar) and hence US debt is being bought by different nations.
    However, it is only a matter of time, of rising debt and geo-political turmoil before the US will be in the same position, say 10-20 years from now, if the graphs continue to behave in the same parabolic way.

     

    "How is Japan's massive geriatric population supposed to live on less than 0.90% in bond income if the government is hellbent on sparking inflation?"
    Well, if they work till they drop and buy gold and Japanese blue chips, they'll survive. Don't forget this policy does make exports boom and gold protects them against an eroding Yen.
    Having said that, I'm not the one who is in favor of ZIRP. ZIRP kills the formation of productive capital and it causes currency wars. There are other and better ways of tackling deleveraging.
    29 Nov 2013, 02:56 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    ...but gold doesn't pay a dividend so if you are a 70 Japanese widow you are completely out of luck in the face of rising prices and bonds that pay 80 basis points.

     

    ...and if the central bank is buying all of the bonds then, technically, they have no public value.

     

    This in a country with a collapsing birthrate and near zero immigration.

     

    How can that country possibly survive??
    29 Nov 2013, 07:50 PM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    Concerning gold, 2 observations:
    1/ The accrue of supply is limited since mining is running out; technically not, but practically yes -the unmined gold reserves are immense but at these energy prices impossible to recover-.
    Given the still fast growing world population that should translate in a steadily raising gold price -even pre-inflation.

     

    2. Gold doesn't pay any dividends, I know, but so doesn't BRK or AMZ. That doesn't prevent their share prices from raising.
    The "dividends" that you can get from gold are inherent in its nature. If you think that the East is gradually backing up its economic handicap, than gold is the best investment: the East are growing, gaining purchasing capacity and they love gold.
    Notwithstanding all Western Central Banks shenanigans, the gold price overtime will raise more than inflation, there is no doubt about that.
    So if anyone who has gold in small entities and sells from time to time (as people do with their BRK or AMZ shares) a tiny little bit, he has his dividends.

     

    "How can that country possibly survive??"
    It's a bug in search of a windshield as John Mauldin's pun goes. These things can only last till they crash. But don't forget Japan owns ca 1.3 T of FX reserves and the figure is growing again. That's not bad for a country with collapsing birthrate and 0 immigration, is it ?
    30 Nov 2013, 03:29 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    If you are an elderly Japanese person it doesn't matter if Berkshire-Hathaway doesn't pay a dividend because you are on a fixed income and fixed income instruments are all you care about.

     

    And what good are FX reserves when your debt is 3x your GDP?

     

    You will have to drain your reserves to pay interest on your debt as your GDP shrinks due to low birthrates and near zero immigration.

     

    There is really no way out for Japan.
    30 Nov 2013, 09:36 AM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "fixed income instruments are all you care about."
    Therefore, they better change their habits.
    I personally think elderly US citizens would have advantage to take that advice seriously too and invest in alternatives like gold and equities.
    To thrive on fixed income is utterly impossible in a deleveraging environment. It's like trying to combine water and fire.
    Therefore, diversification is of the essence now.

     

    "You will have to drain your reserves to pay interest on your debt as your GDP shrinks due to low birthrates and near zero immigration."
    Not if at the same time the BoJ induces inflation.
    Hence the need for diversification from the point of view of the savvy Japanese investor, away from fixed income instruments.
    30 Nov 2013, 11:56 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    So how is this 73 year old Japanese person who is buying precious metals and volatile equities going to pay his or her rent, heat, water, gas and food?

     

    These expenses are getting more expensive too as the government has an explicit desire to stoke inflation.

     

    There is a difference between a "savvy Japanese investor" and an old person who just wants to eat in an apartment that isn't freezing.
    30 Nov 2013, 01:05 PM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    Every investing career starts with saving capital.
    If the 73 year old Japanese person has not been in a position to save during his life, he will be toast (or freezing if you prefer).

     

    I was only referring to 73 year old Japanese persons who had been able to save during their life and who want to protect the purchasing capacity of their capital.

     

    I just got an e-mail from my favourite economic writer John Mauldin, noticing me that he wrote a new letter on the subject of Central Bankers and ZIRP. I also recommend you his latest book 'Code Red, how to protect your savings from the coming crisis" in that regard. It's excellent.
    http://bit.ly/1aiBzQ4
    I completely agree with John and would like to share his vision with you.
    http://amzn.to/1aiBzQ8
    30 Nov 2013, 02:11 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    Using that hypothetical 73 year old Japanese person as an example:

     

    He would have been 49 years old when his stock market crashed and he would have most likely lost 50% of his net worth from investing from 1969 -1989.

     

    So, the perspective of a Japanese stock investor is a heck of a lot different from that of an American investor over the last quarter century.

     

    The Japanese are stuffed with JGBs and if the government wins then those bonds will fall in value.

     

    Therefore the average Japanese net worth will fall as well...during a time of out of control debt for the country.

     

    Again...I don't see any way out of the bad situation for them that doesn't include a collapse in FX holdings and a possible IMF bailout.
    30 Nov 2013, 04:15 PM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "He would have been 49 years old when his stock market crashed and he would have most likely lost 50% of his net worth from investing from 1969 -1989."
    Knowing that his Government would be pushing for ZIRP and higher debts the 49 year old Japanese should have had the good sense of investing in gold and foreign assets instead of investing in JGB's. Given the Carry Trade, I think a lot of Japanese indeed had that good sense and made good money.
    Actually, the Japanese problem was easily foreseeable since the Japanese population was ageing so fast so long ago already. They already faced the problem of an ageing population long before the Western countries. The consequences of that problem were easily reckognizable and are always deflationary.
    Instead of letting part of their banks go bust, they preferred to create zombie banks and to sclerolize the situation by injecting ever more money into the system.
    They indeed will inflate the Yen still more and people with fixed income will be the victims. I don't think it's in the IMF's power to save Japan: TBTS.
    But in the mean time they keep on accumulating foreign reserves and they have no extern debt.
    http://bit.ly/19aTLvk
    Can you explain that to me ???
    I certainly see no liquidation of FX holdings from their part for now, on the contrary.
    30 Nov 2013, 05:06 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    It is very easy to say what they should have done but the fact is you can't go back in time and "make all of the right moves".

     

    The facts, as they are, remain:

     

    Japan has too much debt, too few babies and immigrants and a shrinking national net worth.

     

    If they generate inflation then the debt service will swamp all income taxes.

     

    If they continue with deflation then they will have zero chance of paying off (or even reducing) their debt.

     

    The only lever left is the foreign exchange holdings (including U.S. bonds).

     

    As the Japanese get older they will have less and less disposable yen to pay for everyday things.

     

    There is no hope for that country.
    30 Nov 2013, 05:12 PM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "The only lever left is the foreign exchange holdings (including U.S. bonds)."
    I don't agree. Devaluation of the Yen will prove to be a very strong lever.

     

    "As the Japanese get older they will have less and less disposable yen to pay for everyday things."
    There is always an inflexion point.

     

    "There is no hope for that country."
    If such is your beleif, so be it. I did my best to convince you of the contrary with rational erguments. If you dismiss those, that's your responsability and if you make your investments accordingly, I pity you.

     

    Having said that, the row over the islands between China and Japan causes me more concern. There's another reason to be invested in gold now. China is the new expansionist nation in the region. Economic expansion always comes with territorial expansion. I expect more of Chinese territorial expansionism in the coming years.
    1 Dec 2013, 04:08 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    How is devaluing the yen a positive for tens of millions of Japanese that depend on fixed income investments to provide current income?

     

    If they were all car and electronics executives then it would be all good.

     

    I don't understand.
    1 Dec 2013, 11:00 AM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "How is devaluing the yen a positive for tens of millions of Japanese that depend on fixed income investments to provide current income?"
    It will be extremely awful for them, desastrous !
    Therefore I recommend them to invest their money in gold and equities.

     

    "If they were all car and electronics executives then it would be all good."
    No, not even they will profit from the coming devaluation of the Yen. Their salaries will stay subdued.
    Only shareholders will profit.
    1 Dec 2013, 11:14 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    I am a big gold person as my comment history would suggest...

     

    But it makes no sense to recommend to elderly Japanese pensioners and JGB holders that they should sell their bonds to buy gold when they need INCOME.

     

    A younger person? Sure.

     

    But not members of the huge older generations who can't eat without coupon payments or dividend income.

     

    If anything, they should buy REITs or foreign MLPs if possible...but not gold or silver.
    1 Dec 2013, 11:17 AM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "But not members of the huge older generations who can't eat without coupon payments or dividend income."
    The price of gold is bound to go up. The reasons are: World population increases; China buys like hell; the Yen gets devalued at 200 miles/h....
    The US Fed can temporarily put a halt on the gold price increase (2-3 years ?) till their own reserves are exhausted, but not longer.
    If a member of the Japanese older generation buys gold in pieces of 1 oz -say for example 1,000 pieces of 1 oz- now in one time and eventually sells them one after the other -1 each month- starting 3 years later, he'll have a nice dividend on his investment during 1,000 months. If he's 73 now, that'll bring him 19 years later. By that time he'll be statistically dead.
    Did you notice that the gold price in Yen has NOT plummeted recently ?
    http://bit.ly/1cKcMHE
    Have you ever wondered why the gold price in Yen has not plummeted ?
    The answer is: because of the depreciation of the Yen.
    And this is only the beginning.
    Thanks to the coming devaluation of all fiat currencies, the gold price is bound to rise, expressed in every weak fiat currency.
    What happens now to the yen, will happen to the USD, the euro...

     

    Beware of REITs, they're overvalued and lots of companies that are involved in REITS are highly leveraged.
    I don't know enough of any particular Master Limited Partnerships to say something sensible about them. Anyway, any investment Japanese people make in foreign asset classes bears high taxes due to protectionism, so an MLP might not turn out to be such a great investment for them.
    Again, there are enough Japanese blue chips (Sony to name but one) that are going to profit from booming Japanese exports. Japanese Members of the older generation should invest in those and in gold.
    1 Dec 2013, 01:25 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    Gold, which pays no dividend, is not a safe investment for older people who need current income.

     

    Gold is a speculation if the purpose is a trade.

     

    I'd advise that they sell JGBs and buy U.S. and European blue chips that pay a safe and steady dividend.

     

    The equity risk is just something they would have to live with.
    1 Dec 2013, 01:56 PM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "Gold, which pays no dividend, is not a safe investment for older people who need current income"

     

    That sounds like an ideology, not like a rational argument.

     

    I gave you my rational argument (our Japanese friend buys 1,000 pieces of 1 oz and every month after that sells one).
    If you look at the price of gold from, let's say 1960 to now, it hasn't decreased, has it ?
    If I would have bought 2,000 oz in 1960 (at $35.27) and sold 1 oz every single month since then, I would have not only preserved my purchasing power, but made profit moreover.
    http://bit.ly/wYunOO
    So how can you say then that gold is not a safe investment ?

     

    "Gold is a speculation if the purpose is a trade."
    Every asset that is being bought and sold is a speculation: have you forgotten the US housing market ? The 2008 stock market ? Your memories must be incredibly short.

     

    "I am a big gold person as my comment history would suggest..."
    Referring to your latest comments, I very much doubt that.

     

    "I'd advise that they sell JGBs and buy U.S. and European blue chips that pay a safe and steady dividend."
    Right now I advice them to buy Japanese blue chips because these are the ones that are going to profit from the Japanese export boom. US en European blue chips (carmakers, electronics, machinery, you name it) are the ones that are going to be hit by fierce Japanese competition, unless.... the USD and the euro get devalued too overtime in the same degree as the Yen is being devalued.
    Besides, I don't know the situation for small investors in Japan. It could be that taxes on buying and selling foreign equities and on getting dividends paid are high. These kind of taxes are exceedingly high in Europe versus US, Japanese.... equities.
    1 Dec 2013, 03:20 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    Nearly 6000 comments...at least 20% of them are "pro-gold" so that's over 1000 comments.

     

    The only pic I have ever used on this site is a pile of gold.

     

    Even the most cursory search of my comment history would support this.

     

    What one would have done since 1960 doesn't matter as it is 2013 and a Japanese person needs to worry about today and tomorrow.

     

    Even the most ardent gold bugs don't argue that gold can or should be used for income.

     

    Gold is NOT a safe investment for older people as it is WAY too volatile. If the plan is to pass it on to the next generation then that is a different story. If the purpose is to preserve wealth for an UPCOMING disaster then that is a different story.

     

    Volatility is not equal among asset classes or even within them.

     

    As an example, the financial crisis simply wasn't as bad for a person in Texas or Arkansas (two places where there was never a real estate bubble) whose wealth was 60% bonds, 15% precious metals and 25% blue chips.

     

    Gold is HIGHLY volatile on a daily price basis in dollars.

     

    Why would an elderly Japanese person put a substantial chunk of their worth in this volatile, non-dividend paying asset?

     

    That doesn't make sense.
    1 Dec 2013, 05:21 PM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    "Nearly 6000 comments...at least 20% of them are "pro-gold" so that's over 1000 comments."
    Then why this sudden throwing in of the towel ?

     

    "What one would have done since 1960 doesn't matter as it is 2013 and a Japanese person needs to worry about today and tomorrow."
    That was just an example to show you that there is constant inflation and that what counts for the past also counts for now. I don't understand why you keep on deliberately misunderstanding the obvious. Or do you truly beleive that This Time is Different ?

     

    "Gold is NOT a safe investment for older people as it is WAY too volatile."
    Do you know of an alternative that is less volatile ? Housing ? CDO's ? Overvalued equities, REIT's, Bonds ? You name it.

     

    "Gold is HIGHLY volatile on a daily price basis in dollars."
    I don't know on what planet you live, but over here the days that the gold price changes more than 1% are exceedingly exceptional. The days that my shares go up or down by more than 2% are numerous. Daily Gold price volatility is a perception, no reality, compared to other asset classes.

     

    "As an example, the financial crisis simply wasn't as bad for a person in Texas or Arkansas (two places where there was never a real estate bubble) whose wealth was 60% bonds, 15% precious metals and 25% blue chips. "
    The financial crisis was completely non-existant for anyone who in 2008 was 100% in bonds, apart from the fact that he/she didn't get any dividends worth mentioning (anyway lower than inflation). And anyone who was 100% in gold made nice profits (higher than inflation).
    What do you want to prove with that ? That now again one should be invested in 60% bonds, 15% PM's and 25% blue chips ? Or that one should flee to Texas or Arkansas to be shielded from the next crisis ? I don't get your point. With bond rates in nearly negative territory, how can you advocate bonds now ? And US blue chips are way too overvalued to buy now. I agree though with PM's, but would correct it to 50%.

     

    "Why would an elderly Japanese person put a substantial chunk of their worth in this volatile, non-dividend paying asset?"
    Because not other asset class is less volatile and pays more dividends to him (a savings account ? JGB's ?) than gold, except Japanese blue chips.

     

    But if you are convinced that that doesn't make any sense, be my guest.
    2 Dec 2013, 03:50 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (10729) | Send Message
     
    Well, I can see this is a waste of time.

     

    Gold doesn't pay dividends.

     

    Elderly income investors need income which gold doesn't pay.

     

    You can be pro gold and still be a rational, logical person.

     

    Bonds pay a coupon, equities pay a dividend. Gold pays nothing.

     

    That is a fact...pure and simple.

     

    Good luck trying to get dividends out of your gold holdings.
    2 Dec 2013, 10:16 AM Reply Like
  • filipo
    , contributor
    Comments (4531) | Send Message
     
    Deep,
    Good luck with your Bonds.
    Soon they'll pay you a negative yield.
    At that moment, I guess you'll still stubbornly stick to your idea that they do pay a coupon, be it a negative one.
    At that moment I'll be lucky with my gold that, thanks to inflation, I'll be able to sell in small parts, with a profit, month after month, during 20 odd years.
    But apparently trying to explain you that in a coherent way is a waste of time.
    And good luck with your AMZ equities too. You must have a special relationship with that company that you succeed in extracting dividends from it.
    2 Dec 2013, 11:58 AM Reply Like
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