Tag Archives: Cement

Forecast is for stormy skies ahead

5 Feb

Sad to say that it appears things are looking worse round these parts.

TEPCO has received an additional 700,000,000,000 in yen for their Fukushima compensation fund putting the total available at 3,240,000,000,000 yen. Yes that’s 3 trillion yen folks. The monies are to be spent on projects and other expenses related to the nuclear meltdown and are already being poached by the criminal elements in society.

Decontamination crews have had their wages cut or withheld by employers out to milk the system. I would rather not get into the ugly details about what “decontamination” means here but simply put persons using a dirty rag to wipe off a roof tile are part of the solution. Further there isn’t a place to keep the dirty soil so it is put in garbage bags and piled up wherever they can find space. I guess its the heftybag solution to nuclear fallout.

I just read that a toxic smog from China is now floating over Japan. Its not surprising that this would occur due to the following facts;

1. China puts a new coal fired power plant online every 3 weeks and will do so for the next 20 years
2. The quality of China’s coal is marginal and has a very dirty burn resulting in a high particulate rate
3. During Winter the winds blow from the West to the East, thus Japan is downwind from China

People are being cautioned about going outside, especially the young and old. its interesting as many schools have just completed their mandatory student marathon class. Perhaps the air was unhealthy then as well ? I don’t know for sure but it wouldn’t surprise me in the least if it was.

Its hardly scientific but a number of people in my neighborhood have all experienced nausea, vomiting and severe headaches over the past week or so. Perhaps there isn’t a correlation but then again…

Our local newspapers here are now reporting that Mount Fuji has increased pressure. The mountain is starting to vent gas along the NE side. Lakes near the base of the mountain also have heightened water levels of about 1 meter. The entire area is a subduction zone with Suruga Bay pushing under Fuji like an escalator. My neighbor mentioned Fuji acts like a clock erupting every 300 years. The last eruption was 1707.

So its good news all around !

The Abe government continues to devalue the yen so as a result prices are starting to climb at the retail level. Perhaps I have mentioned some of this news before but I thought it prudent to post it in case I hadn’t.

Anyway today we are off the wholesale food shop and to kick the tires at a local car dealer. With some luck we will get a credit approval for a rock bottom low rate on a car loan. Lock in a fixed rate and smile all the way to the bank if and when the Yen hits 150.

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Abenomics is based on Hope and little else

21 Dec

Abenomics is based on Hope and little else

With the election hype now passed the country can get back into the business at hand. With the new LDP government staring at 20 years of deflation, a stagnating economy, already outrageous prices at the consumer level coupled with more financial printing from Tokyo and a vague promise of inflation does make magic happen. In fact it can be argued that it was the LDP who are responsible for causing the eye popping debt levels in Japan. So we are staring at what is essentially “more of the same”.

Promises of short term cash infusions of approx 2-3 years into already hurting rural communities brought the LDP back into power. This is due to the manner in which political power is determined thus putting the highly educated 30-40 year old urban dwellers in the back seat while the older rural residents get the prime spot at the table. Improving schools and hospitals against earthquake and tsunami is the rallying cry now. Yet here in central Japan the downtown elementary school is closed due to a lack of students. The sales pitch is a lot of hot air. Yes hospitals need to be earthquake resistant but I was under the impression that they were built to withstand earthquakes in the first place. Is the government saying they aren’t and thus must be “improved” ? Only another 10 trillion yen this time and all will be right with the world. From where I sit, something stinks.

Free Trade is dead too. A major LDP insider appeared on NHK tv the other night and said as much into the camera. Japan cannot sign an agreement that threatens to disturb its inefficient and antiquated distribution system nor threaten its pricing policies which keeps the domestic agriculture in business.

The yen will be weakened, yet this has been part of the overall policy of the government for years without success. Are we to believe that because Abe makes a speech and a campaign promise that it is going to happen ? I guess I am from Missouri on this position. Show me Mr Abe, where is the beef ? Yes the yen has moved into the 84-85 range in exchange to the dollar but my understanding is that the goal is about 106-08. Yet Japan must import all its energy and with a weakened yen how will they manage their import energy costs ?

The answer I see will be that the LDP will announce that the nuclear reactors will be turned back on. This will accomplish a few things, reducing costs, providing Japanese energy jobs and offering additional atomic pork to rural communities to provide needed energy to the mega cities.

The clock is ticking on the new PM and his version of the same old medicine just doesn’t add up as I see it. Perhaps having former PM Mr Aso in charge of finance will help to mitigate the oncoming financial disaster we all see coming. Lets hope so, the LDP is going to need all the help they can get. 20 years of financial hell doesn’t go away because the new PM says so.

Not getting better either

1 Dec

continuing on a similar subject

Plenty of money

30 Jan

Welcome dear reader, let me tell you what I learned today because if I don’t I am afraid I will pull my hair out.

Here in central Japan its business as usual. What I mean by that is that there is a continuation of pork barrel pet projects of marginal use to the general public. The politicians sell the idea as a jobs project and the government based entities sell bonds to the general public pension funds. Work begins and there is enough money left over to pay a variety of slush funds, drinking parties and other assorted billings so that the old boys club gets their pound of flesh. I don’t want to be overly critical but sometimes I really just am left shaking my head at the futility of this mindset.

A prime example of this comes from the newspaper in my mailbox today. For the last 20 or so years the government of Shizuoka prefecture has been building a toll road in the foothills off the Pacific coast. In itself a toll road is probably a good idea as the revenue generated will theoretically more than offset the costs of the project. Yet there is already a multiple lane toll road along the coast of Suruga Bay. So the “new” toll road actually doesn’t provide any new utility but rather adds better access for drivers within the prefecture who were already using the “old” toll road.

Something just doesn’t seem right, so I took a closer look at the story. The road itself is 162 kilometers long, laid out along the ridge of foothills and through a variety of tunnels when necessary. Its an engineering masterpiece in a country known for windy roads this new one is as straight as an arrow. Its a very impressive photo.

Then at the end of the article it mentions the cost. The project cost over 1 trillion 6 hundred billion yen. Yes that’s right folks, 1,600,000,000,000 yen. At 76 yen to the dollar I will let you do the math, but trust me its a lot of money. Factor the cost per kilo if you really want to puke.

Yet the road itself doesn’t serve any new drivers. It simply expands road capacity. That’s a lot of money to pay for a wider road in a country that is slowly going bankrupt. While a road supporter could argue that the tolls will pay off the bonds over time, I am pretty certain that the capacity didn’t need a 1.6 trillion yen expansion. Then again the Japan highway road corporation is a massive project and it does provide many jobs…

I guess I am left asking the question “what price must we pay for development” and more importantly could the money have been better spent elsewhere ?

I am sure the answer is as simple as it seems.

New Taxes coming soon

21 Jan

Despite the protests of the minority Liberal Democratic Party, Prime Minster Noda and his Democratic Party of Japan have plans to submit a bill to parliament to increase the current national consumption tax up from the current 5%. The existing plan calls for an increase to 8% in 2013 followed by the final goal of 10% by 2014.

His government’s position is that 2.7 trillion yen or 1% of the tax increase should be used to support the social welfare system and that 10.8 trillion yen or the other 4% should be used to stabilize the current social security system. This would in effect maintain government contributions to pensions at 50%. Hmm where is the money to reduce the debt coming from ? Oh wait that isn’t part of the program, my mistake.

To Mr Noda’s credit he is openly stating that Japan must reduce its debt to GDP ratio, which is currently above the 200% level. Mr Azumi the Finance Minister is on the record saying that the recent Euro crisis and adverse bond revaluations courtesy of the rating agencies will come home to roost in Japan. While the PM and his ministers should be applauded for telling the truth, this gaijin is left wondering how the situation got so putrid in the first place.

It isn’t hard to find the answers.

For starters the country was ruled under the iron fist of the LDP for 54 years. Without challenge for the better part of 5 decades the LDP was in charge. For better or worse the country prospered under its leadership. Japan exports surged under the relatively weak yen and the work ethic of the Japanese Zaibatsu. Zaibatsu roughly translates to Corporate Japan, however the Japanese model is more closely associated with the gilded age of US trusts than anything currently existing in the Western world in the 21st century. Economy of scale is critical for a country lacking the natural resources to support its industrial capacity, which is a perfectly logical conclusion to make.

As the years passed the LDP with its big spending programs of government pork barrel projects paved the archipelago in concrete, built airports, highways, river bottoms and port facilities. Japan is actually 7th in the world in cement production yet is the size of Montana. The politicians and their road contract buddies grafted err voted endless pavement contracts. In fact on a road near where I live the construction has never ceased for 8 years! When they reach the end of the road they start “improving” things back at the start. Its a jobs program pure and simple and in this regard I can appreciate its utility, however I am left wondering if the money couldn’t be better spent elsewhere.

This has to do with the way spending is conducted here. The national government decides the projects to be done and earmarks the money. If the various prefectures want the money they must spend it in the way the Parliament wants it done. Yet apparently only 20% of the approximate total money comes from Tokyo, with the individual states dipping into their own accounts to come up with the balance. This has resulted in a push back from the various governors who are left with no wiggle room and boom era spending programs of little or no benefits. In fact quite a few of the programs end up as a liability. I could go into details on this but I think the point is already made and there is no need to rub salt into the wound. This subject probably bears its own post so I will leave it be for now.

While the United States is currently experiencing the beginning retirements of its baby boomers, Japan has been undergoing this demographic challenge for some time now. So its no surprise to those of us who ascribe to Kondratieff cycle theory that its now clearly Winter time in East Asia. Its a well known fact that average personal spending peaks around age 48, and Japan has long since passed that magic number. No wonder the country is in a 20 year funk.

As mentioned in an earlier post the Japanese have many strong points however a glaring weakness is the ability to openly confront an issue. So the SOP spending programs continued as if nothing had changed. Meanwhile the country was slipping farther into debt, tax revenues were decreasing and entitlement programs were mushrooming. The LDP is clearly to blame for this absurd state of affairs. I am not sure what their excuse would be but perhaps the glamor of the Carousel of debt was too much to pass up. After all look how far the Japanese have come. Its been a miracle story of diligent hard work done by a people with barely any national resources except their brain power. With decades of 70 hour work weeks they fine tuned US production methods and built themselves an empire based on quality control, crunching numbers, savings and investing in their children. Even to this day Japanese engineers sit in offices for countless hours finding a multitude of working solutions to the EU’s growing green energy requirements. If I hadn’t partly experienced it for myself I wouldn’t have believed it.

Now however the sun is far from rising and is in fact setting, yet until recently it was full speed ahead and damn the torpedoes. Now the country is faced with a mountain of debt, an economy that is at best flat, a natural catastrophe, a lasting nuclear emergency and social entitlements that are only going to increase. Deck chairs on the Yamato indeed.

Not to paint with too dark a brush I want to stress that if any culture is able to get out of such a box it would be the Nihonjin. A lengthy history of struggle, overcoming long odds and ample capacity to sacrifice clearly indicates it somewhat foolish to believe that Japan cannot find a solution to what ails them. The medicine however is growing increasingly sour and denial isn’t helping the situation.

Much like what is transpiring in the EU and the USA, there is an increasing rift between the older folks with their comfortable lifestyle based upon consumption and the under 30s along with the have nots who want to re-arrange the apple cart. However that is NOT an issue for Japan. The young will simply accept their fate and the old will continue on as if little has changed. Perhaps they will tweak the margins but it won’t avoid the inevitable day of debt reckoning.

The difference is that here in Japan, the debt is owned by the Japanese people. I have little doubt that they will simply accept the necessary haircut required to balance the schedule of payments. A total default is in my humble opinion not part of the cards, but a partial one is in fact quite likely.

Mr Noda and Azumi are simply the messengers, however as I have already explained their popularity will quite likely be in the single digits by September and the Merry go round will wind up another round of music. Hopefully the tax increase which I believe is all but certain will drive the subject onto lips of the public.

Perhaps in the long run Mr Noda will go down as a leader of sound financial policy. Until then the LDP will obfuscate and interfere hoping to gain the reins of power themselves, so that they can in turn steer the ship of state onto the rocks that bear ever closer.