End of January Update

31 Jan

Its been too long since I paid attention to this blog so I thought I would post some humble musings for my dear readers.

The Yen has continued its weakening and is now sitting around the 90-91 level. While from outside the country this might be worth a read in the business section or a few thoughts about how one might make some money I have to tell you that it is starting to affect things here. Gasoline prices are about to go up about 2 yen per liter, granted its not a significant change but it is what I believe to be the first in a serious of gradual price rises as the Abe government continues to devalue the Yen.

A very good indicator are food prices. In a country that imports approximately 60% of its caloric intake a weakened yen translates directly to higher prices at the supermarket. Since it is also fairly well known the supermarket margins are razor thin the company has little choice but to pass on the increased costs to its customers. Portion sizes will decrease and prices will continue upwards as long as the Yen continues to devalue. Bananas in particular which are primarily imported from the Philippines are an excellent way to check the relative strength of the Yen. The prices have already started moving higher and the number of them on the bunch are also fewer that before.

Here in town a number of supermarkets that had been in business for decades have closed. Most have reopened under new management but I suspect the number of players in the marketplace have been reduced although I have no proof at the time of this writing that this is in fact the case. Fewer players in the supermarket space will result in less choice for the consumer and additionally put more pressure upon those choosing to service the community under greater pressure not to raise prices without just cause. In my opinion its a very ugly situation that is bound to get worse.

There are other disturbing trends as well. Recently a rich money fund operator was murdered outside Tokyo. He and his wife had led a very handsome lifestyle based out of Switzerland but had returned to Tokyo for some reason or another only to find themselves killed and dumped in a shallow grave outside town. I suspect and have no proof whatsoever that this was in fact a Ponzi scheme operator who had pissed off the wrong investors. The fund had purportedly showed very high returns which in itself is a highly significant story as Japan has had 20 years of deflation. How could this couple show such great returns for so long ? After the economic crisis or what is referred to here as the Lehman shock I suspect they could not access further derivative credit and were forced to return to find new investors. When confronted for a return they could not provide it and were then killed. In classic Japanese manner the alleged murderer tried to drink some kind of toilet cleaner to off himself but failed and is now in custody. The police found him because he was the owner of the land where they found the buried bodies. Seriously you cannot make this stuff up.

The Abe government continues to say their target is an inflationary environment despite the fact that it will adversely affect many of the people who voted for them. Support levels are in the 64-66% range for now. I am fairly certain that by March 15 which is tax day here in Japan we will see the implementation of the national consumption tax rate hike to 10% up from the previous 5%. This will in fact spur a frenzy of buying as folks look to try and maximize their spending capital which the Abe government will turn around and point to as a sign of improvement. Of course it is relatively safe to assume that come the Summertime and demand has fallen off to its previous low points and with the Yen further weakened, higher prices at the gas pump and at the supermarket we will see Mr Abe’s support levels dropping well below 50%.

Its at the point we will find out exactly what kind of politician he is. I for one am looking forward to it.

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