An Aspect of Japanese Deflation
To cope with a trend of the Japanese yen getting stronger or specifically as high as around 80 yen per dollar, Japanese businesses have taken various measures, including cost reduction, relocation of manufacturing facilities to overseas, and mergers or acquisition of foreign makers, though presently the exchange rate between the yen and the US dollar has been weakened around 99 yen per dollar.
For example, in 1990, one US dollar was exchanged for 140 yen; the ratio of Japanese businesses having manufacturing plants in foreign countries was 40%; and the ratio of production values recorded in foreign plants of Japanese businesses over total production values of Japanese makers was only 4%.
Yen / $ Companies Manufacturing Abroad Foreign Production Values
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1990 140 40% 4%
1996 105 55% 8%
2002 125 60% 13%
2008 100 65% 16%
2012 80 68% 16%
2013 99 - -
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Compared with the situation in 1990, the yen/dollar exchange rate rose by 70%, the ratio of Japanese makers manufacturing abroad increased by 70%, and the ratio of values of production in foreign countries by Japanese makers rose by 300% in 2012.
In 2012, the number of cases of M and A of foreign countries by Japanese makers was 515, the largest since 1985.
So, Japanese makers have made great efforts to survive while the US has been enjoying the ever weakening dollar against the Japanese yen.
Especially after 2208 or since the fall of US sub-prime loan transactions and the Lehman shock, the US or FRB has increased the amount of dollars circulated in the market three times more. But the Bank of Japan expanded the monetary base only by 45%. This imbalance caused the higher yen, since the exchange rate between two countries follows the difference of quantity of money between the two if other conditions are not so different.
Let's check the trend of the GDP deflators of major countries, which can be calculated by dividing the nominal GDP by the real GDP and then multiplying the result by 100.
The above figure shows that deflation has occurred only in Japan in these 20 years as the value of the GDP deflator of Japan has been below 100%.
However since the regime change in Japan in December 2012, the Bank of Japan has provided more drastically money for the market, resulting in rapid weakening of the Japanese yen and a swift upswing of a Tokyo Stock Exchange index.
Put simply the yen/dollar rate was recovered from 77 yen per dollar to 103 yen/dollar and the Nikkei Index was boosted from 8,000 yen to about 16,000 yen at their peaks in these months. This is what is called the Abenomics.
However the key issue is the deflation in Japan, since it has decreased the salary level of Japanese workers and thus reduced the revenue of the Japanese Government from tax.
Nonetheless the real financial condition of the Japanese Government is not so bad compared with other countries in terms of Government interest payments against its net debts. But as an amount of the nominal debts of the Japanese Government over GDP is 200%, this financial balance sheet is still a big problem.
Finally the number of wealthy class households in Japan has not been changed since 1997 despite this 15-year-long deflation. This deflation has not made rich families in Japan poor but allowed them to keep their position. That must be one of major reasons for a deflation-oriented policy of the Bank of Japan and the Japanese Ministry of Finance.
Incidentally Japan is the second largest country in the world in terms of the number of wealthy people following the US. There are 11,020,000 wealthy people in the US while there are 3,580,000 in Japan as of 2012.
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Rev 9:12 One woe is past; and, behold, there come two woes more hereafter.
Rev 9:13 And the sixth angel sounded, and I heard a voice from the four horns of the golden altar which is before God,
Rev 9:14 Saying to the sixth angel which had the trumpet, Loose the four angels which are bound in the great river Euphrates.
Rev 9:15 And the four angels were loosed, which were prepared for an hour, and a day, and a month, and a year, for to slay the third part of men.
Rev 9:16 And the number of the army of the horsemen were two hundred thousand thousand: and I heard the number of them.
Rev 9:17 And thus I saw the horses in the vision, and them that sat on them, having breastplates of fire, and of jacinth, and brimstone: and the heads of the horses were as the heads of lions; and out of their mouths issued fire and smoke and brimstone.