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Archive for January 29th, 2013

Confidence Index decreased to 58.6

Posted by WARREN MOSLER on 29th January 2013

Not conclusive but a bit of evidence the FICA hike is beginning to take a toll.

From Gail:

The Conference Boards Consumer Confidence Index decreased to 58.6, the weakest since November 2011, from a revised 66.7 in December

January 29 — Says Lynn Franco, Director of Economic Indicators at The Conference Board: Consumer Confidence posted another sharp decline in January, erasing all of the gains made through 2012. Consumers are more pessimistic about the economic outlook and, in particular, their financial situation. The increase in the payroll tax has undoubtedly dampened consumers spirits and it may take a while for confidence to rebound and consumers to recover from their initial paycheck shock. Consumers appraisal of current conditions deteriorated in January. Those claiming business conditions are good declined to 16.7 percent from 17.2 percent, while those stating business conditions are bad increased to 27.4 percent from 26.3 percent. Consumers assessment of the labor market has also grown more negative. Those saying jobs are plentiful declined to 8.6 percent from 10.8 percent, while those claiming jobs are hard to get increased to 37.7 percent from 36.1 percent.

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Japan’s debt approaches 1 quadrillion yen

Posted by WARREN MOSLER on 29th January 2013

Debt approaching 1 quadrillion, and the highest as a % of GDP anywhere I know of, and still no bond vigilantes in sight!

Who would have thought???

Not to mention decades of 0 rates, massive QE, and in general the BOJ trying as hard as it can to inflate.

Maybe it’s not all that easy for a CB to cause inflation???

Anyway, net fiscal will add a bit to GDP, but nothing serious, and the hawkish rhetoric doesn’t seem to have changed any.

And note the cuts in welfare ‘paying for’ the increases in defense and infrastructure.

Of the Y92.6 trillion yen in spending, Y43.1 trillion will be financed with tax revenues and Y42.9 trillion with issuance of new bonds, adding to Japan’s massive public sector debt that already totals nearly Y1 quadrillion.

The FY2013 budget does show clear differences from those of the previous DPJ administration, with a clear shift away from social welfare toward defense and infrastructure programs.

It calls for a reduction of Y67 billion in welfare benefits over the next three years, an increase of Y712 billion, or 15.6% in public works programs and a Y35 billion, or 0.8% increase in spending for the Self-Defense Forces.

“Adequate amounts have been provided to ensure the safety of public infrastructure and to address public concerns about national defense,” Mr. Aso said.

The LDP’s call for aggressive public works spending got better reception after the collapse of an expressway tunnel in December that killed nine people. Simmering tensions with China have also increased support for spending programs to improve security of Japanese territory.

In a policy address Monday, Mr. Abe vowed to erase fiscal deficits in the medium-to-long term, but stopped short of saying when, leaving the task to his economic advisory panel.

Sayuri Kawamura, a Japan Research Institute economist, is worried that not enough attention has been given to the risk of fiscal implosion.

“As debt piles up, the cost of servicing that debt also goes up, eating deeper into tax revenue, and leaving less and less for policy programs. The government hasn’t explained how they are going to deal with this challenge,” Ms. Kawamura said.

Posted in Bonds, Deficit, Government Spending, Japan | No Comments »